Complex restart keeps oil above $100
The guest argued that the complex engineering required to restart shut-in water-flooded oil reservoirs and damaged LNG facilities will keep oil prices above $100—and potentially spiking to $150—for a year or more.
The argument
Restarting these reservoirs involves significant engineering unknowns that could take six months to a year to resolve, while damaged facilities like Qatari LNG could take four to five years. This prolonged supply-side friction requires high prices to force demand destruction.
The thesis, stress-tested
✓ What validates it
- ✓WTI crude remaining above $100/bbl next quarter
- ✓Reports of prolonged delays in restarting water-flooded wells
▸ Risks discussed
- ▸Global economic recession
- ▸Immediate peaceful resolution that avoids restart delays
Hear it yourself
"Another week has passed, and the Strait Of Hormuz is still effectively closed. As of recording time, there were rumors flying about that yet another deal was supposedly imminent. But we heard that story several times before, and it didn't happen. Many of you who aren't professional crude oil traders don't know the name Morgan Downey. But for almost everyone who's a pro oil trader, Morgan's 2009 book Oil one zero one is as familiar as Keynes or Hayek. Morgan joins me as a first time guest to talk about this crisis, and Morgan says that we've reached the point already now where the buffers and safety margins have all been consumed."