Lots of headlines. All bullshit. Citi joins my team of Iran bears today.
We continue to believe that oil markets are under-pricing duration and tail risks, and we expect Brent to trade up to $120/bbl in the near term. We continue to recommend that clients consider taking exposure to near-dated Brent as a hedge against prolonged supply disruption, as well as an outright position, given the likelihood of continued positive roll yield associated with sustained low inventories.
The timing and pace of the reopening of the Strait of Hormuz (SoH) depends largely on the Iranian regime and is therefore difficult to call. It appears increasingly likely, in our view, that the Iranian regime will disrupt SoH flows for some time, but will eventually deal, as it balances the benefits of keeping the SoH disrupted relative to the benefits of re-opening the SoH:
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