Why Hasn't the Oil Price Gone Stratospheric? (Client Q&A)

Gulf paralysis has removed an estimated 20mn bpd of crude from global markets — around 12% of world consumption once diverted pipeline flows and shadow-tanker volumes through Hormuz are netted out. This note walks through David Roche's supply-deficit arithmetic, identifies China's strategic reserve and OECD inventory drawdown as the two mechanisms currently absorbing the shortfall, and sets out why both are approaching their limits.

David's view: as the drawdown runway narrows, Brent should move back above US$100/bbl if the Gulf war continues. The note also addresses the IMF's more benign demand-destruction estimate and why he thinks it overstates the case.