WTI is up $2 since before the US-Israel-Iran war started. A remarkably small premium for a profoundly changed market.
On February 27, the day before the US and Israel launched strikes on Iran, WTI was at $67 per barrel.
Wednesday morning? $69.
A $2 premium against an oil market that has turned upside down:
➔ From a structural surplus to the most aggressive (and ongoing!) inventory withdrawal on record
➔ From fully operational Middle East oil and gas infrastructure to damage requiring years of repair
➔ From full full flows through the Strait of Hormuz to still highly restrained traffic
➔ From toll-free passage through the Strait to a planned fee-supported administration via Iran and Oman
➔ From 36 years of rule by one Iranian Supreme leader to a relatively unknown successor
All of that, and the market thinks the change warrants a $2 per barrel uplift.
It reminds me of the John Maynard Keynes maxim: “Markets can remain irrational longer than you can remain solvent.”
But is it today’s market that’s irrational? Or was it the February 27 one? Both?
It seems like there must be some irrationality somewhere.
Because it’s really hard to draw a rational market throughline over the past four-plus months, given all that’s changed on the ground.
