Petroleum Pendulums

Recorded on Friday afternoon in Houston, Alex Melvin and Mohit Arora return to the Energy Desk for a crude-focused conversation covering six weeks of price action that took prompt month futures from above $80 to the high $60s — and the positioning, supply, and demand dynamics behind the move.

The conversation opens with spec positioning. Brent shorts had moved from near-historic levels before the conflict, to near-historic longs at the peak, and have since made the full round trip back. Physical premiums that ran well above historical norms during the disruption have moved into discount territory. Mohit traces the pattern: the market spent most of this period chasing the move rather than anticipating it.

On supply, Alex walks through why headline disruption figures were likely overstated throughout. When accounting for cargo rerouting and dark transits, the effective supply loss was running below what was widely reported — and that gap widened as transit activity through the Strait of Hormuz quietly increased. Production recovery across Kuwait, Iraq, and other Gulf producers is also tracking at the pace those producers had indicated from the start, with a majority of impacted output expected back within roughly two months of conflict onset.

The demand side received less attention during the peak disruption period but is now a meaningful factor. Chinese crude imports roughly halved between the start of the conflict and May, and remained sharply reduced into June. That slower-moving dynamic, combined with backlog barrels now clearing the Strait, has pushed the market toward a transient period of supply excess ahead of any demand recovery.

The episode closes with the longer-term infrastructure picture: UAE's plans to expand non-Hormuz export capacity, Iraq's pipeline routes to the Red Sea and Mediterranean, and the open question of what Saudi Arabia does with the East-West pipeline as Gulf lanes reopen. The Hormuz tolling conversation and nuclear negotiations remain unresolved. Mohit and Alex note that the pace of alternative route investment may, over time, reduce the Strait's weight as a global chokepoint — though both emphasize the near-term picture still has plenty of variables in motion.

For deeper coverage of the topics discussed in this episode, Mobius publishes ongoing research and market analysis at mobiusriskgroup.com. If you have questions specific to your portfolio or hedging position, reach out directly — the team is available to discuss at podcast@mobiusriskgroup.com.

The Energy Desk is a podcast from Mobius Risk Group. Follow the show wherever you get your podcasts.

‍