by Lance Roberts
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| Commodity markets are forward-looking. Traders don’t wait for events to happen—they price in expectations early. So if the market believes reopening is coming, prices top out in advance. Most people think oil prices are driven mainly by physical supply/demand—but that’s only part of the story. – A small portion = real producers hedging (locking in prices for future delivery) – A tiny portion = retail traders – A huge portion = speculators trading futures contracts These speculators are what move prices day-to-day, reacting quickly to headlines and expectations. When there’s a talk of reopening the Strait (or a ceasefire), oil drops immediately. This happens because traders understand: oil production hasn’t stopped, it’s just blocked from reaching the market. Example: Iran is still producing oil but running out of storage. So when the Strait reopens, all that stored oil floods the market, traders anticipate a supply surge, and futures markets price that in instantly. As a result, prices fall. And this won’t happen in just one day. We will see an initial sharp drop, followed by a 3–4 month downtrend as excess supply works through the system. There’s an important second layer: economic demand. – Job growth has rebounded significantly (ADP data improving) – Economic activity is picking up again – Stronger growth = higher oil demand So you have a tension: bearish supply shock (reopening) vs. bullish demand recovery (strong economy). Which one dominates will determine how deep and long the oil decline lasts. 📺Full episode: Catch me daily on The Real Investment Show: https://www.youtube.com/@TheRealInvestmentShow |
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🔎 At a Glance 💬 Ask a Question Have a question about the markets, your portfolio, or a topic you’d like us to cover in a future newsletter? 📩 Email: [email protected]🐦 Follow & DM on X: @LanceRoberts📰 Subscribe on Substack: @LanceRoberts We read every message and may feature your question in next week’s issue! 🏛️ …
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