3 Oil Straits Jamming at Once

Aug 3, 2026

Chapters

00:00 Introduction: Three Oil Straits Jamming 01:05 Market Complacency and the All-Clear Call 02:30 The Gravity of the Situation: War Risk Insurance & Bypass Maps 03:45 Churchill's Lesson: Diversity in Oil Routes 05:10 Market Hubris and the Contango Illusion 06:40 Global Oil Dependence on Narrow Waterways 07:35 The Strait of Hormuz: Collapsed Transit Counts 09:15 Red Sea Front: Houthi Blockade and Threats 11:00 Black Sea Crude: No Easy Alternatives 12:10 Market Mispricing and the Reprise 13:40 Brent Surges and Widening Spreads 14:35 Saudi Arabia's East-West Pipeline Vulnerability 16:00 Implications: Longer Voyages and Higher Costs 17:45 The New Normal for Energy Prices 19:00 Verdict & Forward Looking: Underestimated Fragility 20:30 Visual Interlude: Sea Lion Sculpture 21:00 Outro and Thanks

Transcript

three oil streets jamming at the same time. The question is, does the market finally understand the gravity of the situation? Let's find out the three oil choke points that are under pressure at exactly the right time, a wrong time, hormones, the red sea, and the black sea. The market has spent a June basically calling the all-clear. This is all good. No problems at all after poor moves, partially reopened. After the MOU, the agreement article five to allow Iran to manage the straight-of-war moose as they see fit for at least 60 days, which then the US then reneged on, of course. So something called backwardation, and a market observation is back where war risk insurance is elevated, and the bypass map is being redrawn in real-time. You're a fuel price, basically. Your inflation, the impact on prices and the broader economy are directly exposed to what is happening right now. Today, we look at why the three straits matter more than one in why the market, in my opinion, team still misunderstands where things are going and where this can go next. The context, so, Churchill warned in 1913 that safety and oil in a variety of lies in a variety of routes and sources. So even then, old Churchill knew you need diversity. You don't want to have one source for your energy needs. You need diversity, multiple options. So, you're protected from anyone path closing to your market. And the market is since, I guess, forgot that lesson. I think there's been a lot of hubris and a lot of ego, basically. The market thinks it knows best, and it can push the oil markets around. And in June, right, Brent fell to, I think it was something like 73 bucks. And the curve basically slipped into what we call contango, slight contango, and the desks, the investment desks. They basically treated the whole moves reopening as a permanent, as basically a permanent action, permanent result of what had happened. So, now they're all surprised, right? Because it's been shown to be just a basically an air pocket. It's only a small duration. I think it was about a month before article five was ripped up and we're back to square one. So, global oil still depends on this hand full of narrow waterways. And when several of them jam up like this, they'll jam up at once, then the system basically has nowhere to hide. And we've become quite exposed quite quickly, yeah. So, there, the catalyst of all this, what caused all this? While the free front's happening at once has caused all this. So, the hall moves obviously normally carries around 20 million barrels a day. And, yeah, well, that's come a crop, isn't it? That's come a crop, yeah. Roughly 30% of sea-borne crude comes out of the hall moves. It is massive, massive transit counts collapse this weekend to single digits. As low as 3 to 8 ships against the normal 125 to 140 transits that go through. All in G flows through the Gulf have basically stopped. I think there was one vessel that went through last week, but essentially, yeah, it's all stopped, so. This is sip of maybe warning you to alter your course and turn back. You are not allowed to cross a straight out foremost. If you keep proceeding, you will be destroyed. This is my last warning to you. If you keep proceeding, you will be destroyed. Alter your course and turn back. I'm preparing to open fire at you. And I'm waiting to see your action. Alter your course and turn back. If you turn back, you will be safe. If you keep proceeding, you will be destroyed. This is sip of maybe out. Pretty shocking, really. The Red Sea is the second front. The hoodies have threatened, not only threatened Saudi, they've basically closed the Mandib straight, the bubble Mandib straight. That's closed now, so I think they've conditionally closed it. They've said, you know, if we like you, you can go through Chinese to your fine. You know, they're around your fine. Israel you're not. America you're not. So that's basically the conditions that they are imposing at the moment. Saudi Arabia's main hormones bypasses the Yan Buu pipeline to the Red Sea. Now that was a refinery was bombed about four days ago. And so I think that just as a threat basically to say to, it was a pretty significant refinery, but that was bombed. And I think that was the threat to the US to back off, to Saudi to back off or face even more significant strikes. Black Sea crew, what about the Black Sea? So basically that has no real alternative. There's no easy alternative. It has to go through the phosphorus. It's got to go through the Turkish straits. So three separate conflicts are now constraining three critical routes at exactly the same time. It's unbelievable. It is incredible. I mean, what else? What next? What are we going to find another location in the world where there's a choke point? And are we going to end up with another sort of drama there? I don't know. It just seems to be the most amazing timeline, really. Yeah. Now let's have a look at the market. So market essentially mispricing and the real constraint. So the paper market, unpriced the war risk in June basically. Then at the reprise, it's straight away. And you know, about a month later, boom. And in days, it had to reprise the market. So Brent is now back up over 90 bucks. The six month spread has returned to strong backwardation. Roughly 8 to 10 bucks. These numbers are just like bad, very bad. Brent WTI is widened, signaling stress on the water-borne barrel. That has to cross the strait. Saudi's east-westers, you know, it can move about 5 million barrels per day. So it's pretty big, but I mean, it has been threatened now. So it doesn't take long, right? It doesn't take much to take out the YNB East-West pipeline. It doesn't take a lot of effort at all. You basically have to strike it with a single missile and the flows will stop straight away. If you hit the pumps, they've basically... It's a big long pipeline and there's a whole bunch of pumps every now and again. And if you take out one of those pumps, they're actually a big job. It's a big job to go and replace those pumps to get them up and running. I'm sure they've got spares and they've got a contingency plan all the rest of it. But it's still no small job. It's actually quite a big job to go and figure that out. So yeah, I mean, it's that east-west. I mean, don't we shouldn't hedge our bets on the east-west pipeline? It is great. It's wonderful. They need more of that and they need more protection around those pumping stations. That's a smart thing to do. If they're not doing that, I'll be amazed. I'll be absolutely amazed. Basically, what does this all mean? Longer voyages. It basically means longer voyages around the bottom of South Africa, around the Cape. And that means roughly... It doesn't actually mean too much, really. It means longer voyages basically mean a delay. An initial delay in the market sort of resettling. Because once those ships are actually sailing, then eventually you get back to a normal sort of state with slightly higher delivery costs. Because the boat will take like an extra four weeks. So instead of... If it's charging you a day rate, then your cost is delivered at boat load. It's going to go up a little bit. So you've got to pass it on to your customer. So the new normal cost of energy. If you take out the whole conflicts and all the rest of it, that's definitely going up. And that's... I mean, that's just something I think we've got to come to terms with. The old baseline cost, I think. We may have seen the last of that. The new normal is well over the 30, 40 bucks that we used to get. We were used to. I think those days are gone. We're now sort of much higher. Maybe 50 or 60 bucks if we can never get back down there again. So verdict and Ford looking. The market still underestimates. That's basically the main story here. We continue to underestimate the fragility of the oil system when multiple choke points like this can become stressed together. Bypass infrastructure can help. And it is helping, but it is vulnerable. It is extremely vulnerable. So it's not a silver bullet. We can expect high volatility. I think that's basically the long and the short of it. We can expect high volatility. Yeah. Energy. Jesus. We've just been looking over here. And yeah. Ever at this pool. And it looks like... It looks like there's a sea lion down there, but it's actually just a sculpture, I think. Pretty cool. I'll flick this around so you can have a look. You're just down here. And they do. Really. I can't show you the penguins. Isn't that neat? Nice little sculpture in the rock. Yeah, well, there you go. I'll review our team. And this incredible world of ours. I hope you have an awesome day. Cheers.

Autopilot distribution by longwave.media→