Episode summary
$120 Oil Ahead?
The Markets
· · Hosts: Chris Hussey · Guests: Jerome Dortmans
Summary
Jerome Dortmans said the oil market’s initial rally after the Iran conflict began was still too small relative to the supply at risk. He argued that roughly 20 million barrels a day of crude, 5 million barrels a day of products, and 20% of LNG production were exposed, and that these volumes are difficult to hedge or replace quickly. In his view, the market is underestimating how much damage even a few more days of disruption could do.
He said timing matters because every day of lost flow would quickly erase the stock builds that accumulated in the second half of last year, while OPEC would have little ability to offset the shortfall. Dortmans also pointed to specific bottlenecks, including damaged or constrained pipelines and Iraqi storage being full, as evidence that the situation could worsen fast. He said the market could move toward $100 a barrel within days if the disruption persists.
On products, he said diesel and jet fuel are the most exposed, along with LPGs, NGLs, condensates, and fuel oil. He also argued there is complacency in broader markets because investors have grown used to geopolitical spikes fading quickly, even though he expects short-term trading to remain biased to the long side across the oil complex. If escalation continues and the Strait of Hormuz stays shut, he said oil could trade between $100 and $120.
Key takeaways
- Jerome Dortmans said about 20 million barrels a day of crude and 5 million barrels a day of products are at risk, plus 20% of LNG production.
- Dortmans argued that if disruptions persist for another two to three days, oil could trend toward $100 a barrel.
- He said diesel and jet fuel are the most exposed products, with LPGs, NGLs, condensates, and fuel oil also vulnerable.
- Dortmans said OPEC cannot meaningfully offset the shortfall and that existing stock builds could be erased quickly.
- He said the short-term trade bias remains long oil, with $100 to $120 possible if the Strait of Hormuz stays shut.
Notable quotes
“You know, we are definitely seeing oil barrels being affected. And just to give you the amount that is at risk here, you know, it's 20 million barrels a day on crude”
“So, I think we are getting very close, you know, to a situation where we need to try to resolve this choke point”
“as we go towards that two to three days, we will start trending towards $100 a barrel”
How the episode opens
This is The Markets. I'm Chris Hussey and today is Tuesday, March 3rd. And I'm here on the Goldman Sachs trading floor with Jerome Dortmans, who is co-head of global oil and products trading.
Let's cut to the chase. Oil's up about $10 a barrel since the Iran conflict started this weekend. What do you make of the move?
Good question. We've actually, in my opinion, given what is going on on the ground, had somewhat of a subdued response on the oil price. You know, we've had precedents over the last sort of eight years where every time something like this happens and the market starts to fear sort of a contagion or a spread to the region, it hasn't really played out and anybody that vests in getting long, you know, has ultimately had to take the pain and had to sell out.
This situation is clearly very different. You know, we are definitely seeing oil barrels being affected. And just to give you the amount that is at risk here, you know, it's 20 million barrels a day on crude.
And it's up to 5 million barrels a day on products. You know, which is obviously-- and 20 percent of LNG production. You know, these are meaningful and un-hedgeable volumes of oil.
The world only produces 100 million barrels a day. So, 20 million is like 20 percent of the whole oil. Yeah.
And this is the first time, you know, that the barrels have actually been impacted. Fine. It's four days right now.
Five days. So, obviously, you know-- Well, let me ask you about that because it is only four days so far. I would imagine how long this lasts has an impact on this as well.
How do you factor that into markets? How are markets thinking about how long?
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- oil prices
- iran conflict
- commodity outlook
- energy trading
- goldman sachs markets
Companies and tickers mentioned
- GS
- Goldman Sachs
Watch the episode
Watch “$120 Oil Ahead?” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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