Oil situation to become an 'ongoing absolute disaster,' warns expert

By TheStreet Roundtable

26 days ago

DJT

TRUMP

XRP

DON

TRUMP2024

Send

Global oil markets are facing crisis moments, Paul Sankey, president of Sankey Research, warned.

He did not mince words when he appeared on Bloomberg on April 23.

The global oil situation, he warned, is set to become "an ongoing absolute disaster" over the next two to three months, and the worst of it has not yet arrived.

The trigger is structural. With the Strait of Hormuz disrupted, roughly 10 to 20 million barrels per day, about 20% of global supply, have been knocked offline.

But the full pain of that blockade takes time to reach shore.

"It's a forty-day process," Sankey explained, referring to the lead time for tankers to reroute and reposition.

With tankers already locked in the wrong places, even opening the strait tomorrow would not immediately resolve the crunch.

"It's just locked in by virtue of tankers. And so almost immediately, what we have seen is that the inventory numbers have now started to get scary, and it's just starting. But you're not at the stage of just outright crisis pricing," he said.

Three months of disruption, he believes, is the more realistic timeline.

"In this case, we can be sure that the next two months is going to be an ongoing absolute disaster, even if you wait, you open the Straits tomorrow because it's just locked in by virtue of tanking tankers."

Who gets hit hardest?

For the average American, Sankey says the situation is uncomfortable but not yet catastrophic.

A very small share of American household income goes toward gasoline, and at current prices, the shock is more psychological than financial, "sticker shock," as he put it, rather than a structural blow.

However, he is quick to note that the impact is regressive, falling harder on lower-income households.

The sharper pain is elsewhere. Speaking on CNBC a few days earlier, Sankey flagged Australia as particularly exposed, an economy that, in his words, "ignored the IEA recommendation for inventories for the last 20 years."

When the Strait reopens, Australia will face the double burden of restocking from a depleted base while competing with every other economy for the same tankers and supply.

Meanwhile, Japan is already fielding concerns about solvents needed for chip manufacturing, an early sign of where industrial supply chains begin to crack.

Popular on TheStreet Roundtable:

The emergency inventory problem

Governments have one conventional lever left: emergency reserves. But Sankey is skeptical of how much runway they actually provide.

The first release of strategic reserves is straightforward. The second becomes uncomfortable.

By the third, policymakers may find themselves unable or unwilling to pull the trigger.

"The emergency inventories are probably lower in real actual terms than they appear on your screen and they appear very low," he said.

When asked whether reports of a two-year global energy crisis were realistic, Sankey called it a fair assumption, a sobering signal that what looks like a short-term shock may be reshaping the global energy order for years to come.

Why it matters from crypto?

The oil crisis is not an isolated situation. Any movement in crude oil prices, up or down, has had a direct impact on crypto markets.

From the announcement of the war on Feb. 28 to the recent extension of the ceasefire, Bitcoin has followed closely how oil and traditional markets react.

Right now, at the time of reporting, WTI crude was up 1.5%, trading for $94.39 per barrel, while Bitcoin was down by 1% and hovering near $78,392.

However, their movements are more nuanced than always being inverse.

For instance, when President Donald Trump announced the extension of the ceasefire ahead of the two-week deadline, Bitcoin rebounded to $78,616 from a $75,000 range, while Ethereum climbed 3.66% to $2,413 and XRP gained 1.65% to $1.45 as risk appetite across digital assets renewed.

However, oil continued hovering in the range of $90 and $91 and there was no major drop per se.

This was mostly because of the lingering uncertainty about the situation.

At the time of writing on April 22, Bitcoin had rebounded to $78,616, up 2.95%, while Ethereum climbed 3.66% to $2,413 and XRP gained 1.65% to $1.45, reflecting renewed risk appetite across digital assets.

Economic instability and dollar uncertainty historically drive interest in Bitcoin as a hedge. We saw this during the Iran crisis when Bitcoin was climbing up rapidly after the initial drop.