Oil Extends Decline as Traders Weigh Trump’s Latest Iran Threats

The physical oil market is breaking. The Strait of Hormuz is permanently impaired by drone threats, creating real shortages of base oils in the US/Pacific Rim. Expect $6/gal US gasoline this summer as refiners prioritize jet fuel and the SPR is drained at an alarming rate (10M bbl/day). The political trigger is the pump price. The market is ignoring the supply chain's fragility. When inventory minimums are hit, prices go vertical.

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Sankey Research 7.2
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Paul Sankey 8.0

Oil Extends Decline as Traders Weigh Trump’s Latest Iran Threats

WTI

wti

National average gasoline will reach $6/gallon this summer. Domestic prices will go vertical when US has to compete with international export sales.

4/23/2026 2:33:29 PM	short term sharp up	5 days later	+13.22%	+19.83%
4/3/2026 7:31:50 PM	short term sharp up	7 days later	-11.86%	-17.79%
3/10/2026 12:06:58 AM	medium term up	20 days later	+16.19%	+16.19%
12/22/2025 10:03:30 PM	short term cautious down	6 days later	-0.51%	+0.26%

Walmart and Costco warned they don't have enough base oil for shelves due to dependence on Hormuz supply.

Alexis
Paul Sankey

Physical shortage of motor oil is real in the US and Pacific Rim. Francisco Blanch confirms Pacific Rim is affected.

Australian inventories are higher than when crisis started, showing successful crisis management. Mexico is booming ahead of World Cup.
Paul Sankey

40% of Asian petrochemical capacity is shut down, creating a major chain issue.
Asks if Strait of Hormuz will ever return to January conditions.

John Tucker
Paul Sankey

Strait of Hormuz will not return to normal. Oil industry will smuggle. US may allow Russian oil sales and turn blind eye to Iranian shipments.

This would come out of China meetings. Trump-China-Putin dynamics are a big deal for oil.
20% of US oil and gas comes from that region. Questions if pipelines are the solution.

John Tucker
Paul Sankey

Drones have fundamentally changed shipping security. Pipelines are a solution but tankers previously had no problems. Suez Canal throughput is still 50% of pre-Houthi levels after 3 years.

250,000 miles of pipelines in North America vs 40,000 in Middle East.
Asks for gasoline price forecast.

John Tucker
Paul Sankey

National average gasoline will reach $6/gallon this summer. API data shows 10 million barrel SPR draw in one day.

Refiners are prioritizing jet fuel (record high inventories) over gasoline into driving season. Octane additives are short in California. SPR is being drawn down rapidly from 390 million barrels.
Paul Sankey

Berlin gasoline will go to $11-12/gallon again.
Asks for analysis of Caspian Sea oil region.

John Tucker
Paul Sankey

Caspian region has huge potential. Chevron's Tengiz project produces 1 million barrels/day. Kazakhstan sits between Russia, China, and US.

Non-OPEC oil will be developed. Argentina, Brazil, and Venezuela will grow massively. Venezuela could boom and make Hormuz less relevant.
As a politician, $6 gas cannot be allowed to happen.

John Tucker
Paul Sankey

The crisis trigger will be US gasoline price. Nasdaq at record high masks the real economy crisis. US will eventually have to compete with international export sales, driving domestic prices vertical.

There is a point in inventory where the system cannot run - we haven't hit it yet but will. When we do, prices go nuts.

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