“Sleepwalking into Crisis”: Why The Oil Market Hasn’t Imploded Yet | Kpler’s Matt Smith
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Today's episode is brought to you by the Tucrium Corn Fund, ticker c o r n. Let's get into it. Got a very important conversation today. I'm joined by Matt Smith, director of research at Kepler, which is a research platform focused on commodities, particularly energy. Matt, welcome to Monetary Matters.
Yeah. Thank you for having me.
It's my pleasure. So, Matt, as we record here in June, we're four months into the Iran war conflict. The Strait Of has been closed for that period of time. So where do things stand? I mean, is the world running out of oil? And if it's not running out of oil, why? What's going on?
We've had the Strait Of Hormuz essentially closed for over three months now. You've had about 15,000,000 barrels a day of exports that would be leaving in terms of crude. You can add on another 5,000,000 barrels a day onto that in terms of products. So, that's jet fuel, gasoline, diesel, LPGs, that's not leaving. Some of the crude has been able to be rerouted, but that's only the stuff from Saudi Arabia, a little bit from Fajairah, maybe 4,000,000 barrels a day, something like that. So, for all intents and purposes, you've had this huge chunk of supply taken out of the market. The way that I k
So refineries take crude oil and they produce jet fuel, kerosene, gasoline, the things that human beings and the economy actually use. So, you know, there's you don't people don't really use crude oil basically for anything. You they refine it into these products. So if the refineries have cut 9,000,000 barrels of consumption of crude oil a day to produce the products, Does that indicate what's happened to the 9,000,000 effective barrels of refined products? Have drawdowns and stockpiles of those refined products gone down, or has there been demand destruction indicating that actually, like, t
So it's a bit of both. So, you have had some demand destruction in that it's been implemented by governments for that particular, like in Asia, in terms of rationing or conservation measures. So, that's happening, but that's a very small piece of it. We are not at the point here where oil prices or product prices are so high that they are killing demand. They probably need to be, but they are not, right? So, you have that piece of it. Then you have these countries. So, when we think about the immediate impact, it's been 90% of the crude that leaves from the Strait Of Hormuz goes into Asia. The
What does that mean? Sorry.
So it's in countries where we don't have access to be able to track those inventories. So government agencies that, yeah, provide that. China.
You're saying China. China is drawing down its stockpiles, but you don't have access to that data. No one does.
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