SoH Crisis Takeaways: Top Surprises and Non-Surprises

The crisis is Geopolitical Super Vol — "open or closed" is nebulous

• Recorded Wednesday July 8 as renewed US–Iran strikes broke out; Trump declared the 14-point MOU over and oil rallied in response.
• The Strait being "open or closed" is a false binary — "it's going to be both open and closed regularly." A 47-year US–Iran history means peace won't be quick or easy; expect ongoing twists and turns.
• Series aim is longer-term themes and implications, not a play-by-play — the framework is Veriten's "Geopolitical Super Vol" mega-theme. Surprises fall into three buckets: crude, refining, and the broader economy/market.

Surprise #1 — China's SPR draw as the surprise moderating force

• Of the initial ~15 mb/d crude hit from a closed Strait, ~5 mb/d was offset by Saudi redirecting exports to its east–west pipeline (expected, sustainable), and US/allied SPR + commercial draws (expected, temporary).
• The genuine surprise: China cut imports by 4–6 mb/d by aggressively drawing its own built-up stockpiles — faster and harder than most expected. Not sustainable; China will eventually return to importing ~12 mb/d, but has a longer shelf life to stay lower.
• Bigger picture: Saudi Arabia, the US and China have been the three stabilizing forces holding oil between the extremes — and China as a moderating buyer (soaking up 2025's oversupply too) is why oil didn't stay above $100 or reach $150–$200.

Non-surprise #1 — the return of "oil glut" calls

• The IEA and some leading banks are again forecasting a massive glut — now 3–6 mb/d of oversupply in 2027. Murti calls it "absolute nonsense" and does not think it likely (he also rejected the 2026 "2–4 mb/d, worse than COVID" call).
• Symmetric pushback: the perma-bull $150–$200 case is only briefly attainable before a deep recession kills it — not a bullish scenario. The market has a chronic tendency to extrapolate the extreme.
• He does understand the recent sell-off (oil down from $90–$100 toward $70 as trapped oil got out and China hadn't yet returned to 12 mb/d) — but calls it noise.

George Costanza — "do the opposite" at the extremes

• Long-dated 60-month-forward crude sits in a stable $65–$70 band and is likely to stay there; all the action is at the front end.
• A steep month-1-to-month-60 backwardation (as wide as $25–$30) is a sign of stress, not a reason to get more bullish; conversely, structural contango won't persist in a Super Vol market. Don't get too bullish at peak backwardation or too bearish at mild contango.
• Psychological, not trading, advice — "today I shall do the opposite" of the crowd at the extremes.

The corporate returns standard (Veriten's lens)

• Not about guessing oil prices. The bar for an energy company: earn a decent return even at a normal trough, and never lose money at a deep trough.
• Across the full cycle of ups and downs, the target is a mid-teens cash-on-cash return or better plus competitive per-share growth.

Non-surprise #2 — no smooth peace in an Age of Drones

• Given the long US–Iran history, smooth conditions in the Strait were never the base case; the sell-off wasn't surprising.
• The "Age of Drones" implies persistent instability — ongoing ups and downs are more likely than either stable peace or stable war.

Surprise #2 — refining, not crude, is the structural casualty

• Conventional wisdom says geopolitical turmoil is bullish for crude via supply-disruption risk — but that largely hasn't materialized. After the April 7 cease-fire, Saudi/UAE/Kuwait fields look safe (Iraq a bigger wild card, but volumes expected eventually), so the "permanent disruption" premium is coming out of crude.
• It's coming into refining: Ukraine's drones have hit Russian refineries even thousands of miles away, and this looks like an ongoing feature of markets.
• Refining also suffered most under the peak-oil-demand / energy-transition narrative, which crimped new refinery builds (especially outside the US) — a supply squeeze on top of the disruption. Murti's "obliterating peak oil demand" view: demand structurally grows to meet the unmet needs of the other 7 billion people.

Why not LNG? — Ras Laffan risk vs a growth market

• Ras Laffan is ~17% of global LNG exports — a concentrated geopolitical risk (a couple of trains were hit early and will be out a while); "our favorite industrial city in the world," but a possible attack vector.
• Unlike refining, LNG is a recognized growth market with heavy CAPEX diversifying supply — a huge US Gulf Coast build-out, possible Canadian expansion, and other sources worldwide.
• Qatar knows it depends on the Strait and will find ways to keep LNG flowing, so the ongoing risk premium sits more on refining than on LNG.

Surprise #3 — resiliency of the S&P 500 and the AI/"Power Surge" trade

• The S&P chart shows no trace that a major regional war happened — bodes well for Veriten's "Power Surge!" power super-cycle theme.
• The April 7 cease-fire was the turning point, coinciding with strong Q1 earnings and tech/AI performance. He's not calling AI a bubble either way — the point is the broad market's health and resilience through the crisis.

The 1970s contrast and the policy message

• The US economy fared far better than in the 1970s — thanks to the shale oil revolution, the earlier shale gas revolution, the resulting LNG export boom, and a resilient refining sector. All four matter.
• Super-Spiked's founding argument: a healthy, profitable, resilient domestic oil-and-gas industry — against the "keep it in the ground" narratives. He faults the silent middle as "almost as wrong" as the activists.
• The go-forward reminder: when the crisis fades (2028, 2032, some future cycle), push back on efforts to do away with energy, "the most important industry in the US economy" — upstream, downstream and LNG all need support.

Personal note — World Cup surprises

• Applies the same scorecard off-topic: low-scoring soccer isn't boring (he loves a pitcher's duel — cites the 1996 Braves–Yankees Game 5, Pettitte's 1–0); the Fox studio shows are "simply awful" (Telemundo is better); and European tourists — and the US communities hosting them — are having more fun than perceptions suggest.
• His takeaway: you have to see a place firsthand — media and social-media perceptions (his example: New York) are often at odds with reality.