Rabobank strategists Molly Schwartz and Michael Every highlight extreme volatility in Brent, which spiked towards $120 before closing below $90, driven by Saudi supply disruptions, G7 stockpile plans and US policy options. They report stresses that prolonged closure of the Strait of Hormuz could rapidly deplete global Oil inventories and reshape currency pricing of Oil and other assets.

Record Brent swing and supply countdown

“Yesterday saw mind-blowing volatility in oil markets. In early Asian trading, Brent had exploded upwards towards $120 on Saudi shut-ins and panic; by the end of the US session it was down on the day at under $90.”

“Every day the Strait of Hormuz remains closed, the world is drawing down 10–15m barrels of inventory. The world has 700m, excluding strategic petroleum reserves, as of the end of February. That means in 35 to 70 days, the world is physically out of oil.”

“The G7 announced a coordinated stockpile release, though it delayed until likely today. That would add around 30 days to the countdown above.”

“There were reports the US is considering measures to lower oil prices such as suspending US exports of it(!), and/or the Jones Act for fuel cabotage, and/or gasoline taxes for US consumers.”

“The implications for not just oil but the currency pricing of oil, and of many other assets, should be clear. It may not be happening “soon”, but it’s something you should be thinking about now as you look at Hormuz.”

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