To The Moon

Key market news and important data show significant developments in oil markets and geopolitical tensions.

As of the close on July 13th, the August delivery light sweet crude oil futures contract on the New York Mercantile Exchange rose by $6.73 to settle at $78.14 per barrel, marking a gain of 9.42%. The September delivery Brent crude oil futures contract on the London ICE Futures Europe exchange increased by $7.29 to settle at $83.30 per barrel, a rise of 9.59%. By 2:30 AM on July 14th, the main SC crude oil futures contract closed up 6.20% at 500 yuan per barrel.

The United States will impose a blockade on Iranian ports starting from 4 AM on the 15th. On July 14th, the Joint Maritime Information Center (JMIC), led by the U.S. Navy, stated that the U.S. military will begin enforcing a maritime blockade on all Iranian ports and coastal areas starting at 20:00 GMT on July 14th (04:00 Beijing time on July 15th). The blockade applies to all vessels regardless of their flag. It covers the entire Iranian coastline, including but not limited to Iranian ports and oil terminals. The blockade will not impede the transit passage of neutral vessels through the Strait of Hormuz to and from non-Iranian destinations. Humanitarian shipments will be permitted but are subject to inspection.

OPEC has once again revised down its forecast for global oil demand growth in 2026. According to the monthly report released by OPEC on Monday, July 13th, the organization lowered its projection for 2026 global oil demand growth to 780,000 barrels per day, marking the third consecutive downward revision. However, compared to other agencies like the International Energy Agency (IEA), OPEC still views the impact of the Iran conflict on oil consumption as relatively limited. The IEA expects global oil demand to decline in 2026. The report also indicated that OPEC raised its forecast for global oil demand growth in 2027.

The United Arab Emirates has adjusted its offshore crude oil pricing mechanism to support deliveries outside the Strait of Hormuz. According to a pricing document, Abu Dhabi National Oil Company (ADNOC) will sell offshore crude oil, available for lifting at locations outside the Strait of Hormuz, priced in relation to the Dubai benchmark. For crude oil delivered in August via ship-to-ship (STS) transfer at Fujairah, the company will price it against the Dubai crude benchmark. Upper Zakum and Das crudes will carry a premium of $0.80 per barrel over Dubai crude, while Umm Lulu crude will carry a premium of $1.00 per barrel. These crudes are produced from fields within the Persian Gulf. Simultaneously, these crudes will continue to be sold at their original loading points.

The UAE Ministry of Defense issued a statement today, July 14th, stating that two UAE oil tankers in the southbound shipping lane of the Strait of Hormuz were "attacked by two Iranian cruise missiles," resulting in the death of one Indian crew member and injuries to eight others, with four in serious condition. Iran has not yet responded to the incident. The UAE Ministry of Defense stated that both tankers caught fire, and the fires have now been brought under control. The UAE Ministry of Defense condemned the attack as a "serious violation of international law" and stated it reserves the right to take all necessary measures to defend national sovereignty and security.

U.S. President Donald Trump told media at the White House that he still believes an agreement between the U.S. and Iran is possible, stating "Iran wants a deal and has re-engaged with the U.S." Trump also said that U.S. forces will continue to launch strong strikes against Iran, significantly reducing Iran's ability to influence traffic through the Strait of Hormuz, and are reinstating a "blockade solely targeting Iran," meaning any vessel conducting business with Iran will be unable to pass, while vessels from other countries can still transit normally.

The UAE's crude oil production reached 3.8 million barrels per day in June, a sharp increase of 1.71 million barrels per day compared to May. The UAE, having announced its withdrawal from OPEC in early May, is no longer bound by production limits, and it has successfully maintained cargo exports by rerouting around the Strait of Hormuz during the U.S.-Iran conflict. Russia's crude oil production in June was 8.93 million barrels per day, 834,000 barrels per day below its agreed target, following Ukrainian attacks on its oil infrastructure. OPEC lowered its forecast for 2026 global oil demand growth to 780,000 barrels per day.

Reports indicate that DP World, Dubai's largest port operator, plans to develop a new multi-purpose port on the UAE's east coast and build new terminals within existing UAE ports. The new port could be completed within a year and a half. The group stated it is formulating diversification plans to address potential shipping disruptions in the Strait.

Investment Thesis

Due to escalating tensions in the Middle East, the Strait of Hormuz has re-entered a state of dual blockade by Iran and the United States. Navigational traffic is expected to decline significantly. The current situation is likely to substantially disrupt the Strait's original resumption plans, hindering the pace of global supply recovery. Concurrently, the recovery pace of Chinese demand may also be delayed. The future development of the situation remains unclear. While absolute prices have surged sharply, physical market prices remain weak, and refineries are not accepting the current high prices. The divergence between physical and paper markets is intensifying further. Future developments require close monitoring.

Strategy

Given the volatility in the Middle East situation, a cautious, wait-and-see approach is recommended.

Risks

Downside risks include liquidity crises and major macroeconomic black swan events. Upside risks involve a sustained decline in traffic through the Strait.