The Oil market is calm, but JPMorgan’s Hormuz math says the fuse is still burning
- JPMorgan’s Natasha Kaneva is not saying the Hormuz shock has disappeared. The better read is that the market has found several expensive ways to absorb it, from clandestine flows and Atlantic Basin rerouting to SPR releases and deeper demand destruction.
- The calm in the Brent market is therefore less a clean bill of health and more a measure of how much stress the system can carry before inventories become the price-setting variable. JPMorgan still sees stress levels arriving in late June and operational floor levels approaching by September if the disruption persists.
- My trader view is that oil is still trading the difference between a managed shortage and an inventory event. As long as Hormuz reopens in June, Brent can remain anchored near $95-$100. If the closure extends beyond June, the market’s current serenity risks turning into a very different tape, where every additional month of disruption adds a progressively larger premium to the barrel.
The fuse is still burning
Drawing on JPMorgan commodity strategist Natasha Kaneva’s latest work, the oil market is doing something that feels almost unnatural given the backdrop. The conflict is entering its fourth month, the latest exchange of strikes between Iran and Israel suggests the war is restarting rather than resolving, and the Strait of Hormuz remains the central pressure valve in the global energy system. Yet prices have not behaved like a market staring into the mouth of a supply shock. Brent has stabilized near $100 per barrel, Dated Brent has eased materially, and the physical premium to front-month futures has collapsed from the panic-scramble record of $36 in early April to roughly $2, effectively back near pre-conflict levels. Refined products have also come off their highs, and volatility across both crude and product markets has deflated sharply.
Author
Stephen Innes
SPI Asset Management
With more than 25 years of experience, Stephen has a deep-seated knowledge of G10 and Asian currency markets as well as precious metal and oil markets.
