Opinions

We see that the estimated oil flows through the Strait of Hormuz are down 18mb/d, which corresponds to around 10% of normal levels, even below our pessimistic 15% assumptions. Net redirection via pipelines and the ports in Yanbu (Red Sea, Saudi Arabia) and Fujairah (Gulf of Oman, UAE) at only 0.9mb/d over the past four days (vs. a theoretical estimated 3.6mb/d potential.) The unprecedented size of the supply shock (today’s 17.1mb/d hit to Persian Gulf oil supply is 17 times larger than the peak April 2022 hit to Russia production) and the resulting speed of potential inventory depletion is likely to lead markets to start pricing demand destruction more quickly. All above facts point to Brent crossing $100/bl if there is no change in conditions next week. The main economic impact for most countries is that the recent rise in oil prices to around $80/bbl (on an average) will boost inflation and slow growth. We see a 0.2pp boost to global inflation (with core inflation impacts <0.1pp) & 0.1pp drag on global growth. Effects could be larger if Strait of Hormuz closes for an extended period. If oil price temporarily rises to $100/bl we estimate that global inflation could rise to 0.8pp & global growth could slow by 0.5pp. Almost all crude and crude product prices are higher by between 50-70% over past week. Brent (34%), European Natural Gas (100%), Jet fuel prices (70%), gasoline prices (22%) & shipping costs (70%). The world’s No.1 and No.2 LNG importing countries, China and Japan, have limited exposure to Qatar LNG exports. Instead, other importers most affected include Kuwait, Taiwan, Singapore, Bangladesh and India etc. Kuwait is the most exposed to Qatar’s LNG supplies. Over 80% of Kuwait’s total imports came from Qatar in 2025, which supplied 43% of Kuwait’s total natural gas demand. Pakistan and India sourced 74% and 48% of their LNG imports from Qatar in 2025. Only ~3% of Europe’s 2025 gas demand was supplied by Qatar LNG. In 2025, 37% of Europe’s gas consumption was supplied by LNG imports, ~60% of which came from the US. Russia LNG contributed to 13% of total European LNG imports, while Qatar only accounted for 8%. To summarise, all energy importing countries with heavy reliance on crude from Middle East or LNG from Qatar are likely to get impacted adversely if the Strait of Hormuz remains shut for another week. Brent has a high probability of breaching $100/bl this week itself if there is no change in conditions. We do not see either Iran or Trump using an off ramp under current scenario. We see higher risk of escalations next week itself. For TACO to come true, we need to see S&P falling below 6500 or Brent shooting above $120/bl. Till then crude & crude products remain higher for longer.

One of the most crowded and speculative trades of the past year, precious metals, blew up spectacularly on Friday. Gold and silver collapsed, with silver suffering the largest intraday decline on record, down as much as 36% at the lows. While some may assign this to Kevin Warsh being declared the next Fed chair, we believe there are far more important factors which led to Friday's rout. Most important being margin hikes by CME on silver futures. Since 12th Dec’25 CME has raised Silver margins by almost 80% till end Jan’26. Initially the margins on silver futures were in absolute terms which later around mid-Jan changed to % terms. In it’s 12th Dec notice, silver margin was increased to 22k from 20k, by mid Jan it was at 32,500 USD. Then in mid Jan absolute margins were changed to % terms starting from 9% which now as per the latest notice w.e.f from 2nd Feb is 15%. The similar playbook was used by CME in 1980 & 2011. For e.g. when Silver rose from $5 levels in 1978 to $40 levels in 1980, CME had drastically increased margin requirements on silver futures, causing a severe price crash from nearly $50 per ounce in January to around $10 by March. This action, known as part of the "Silver Rule 7" policy, was a direct response to the Hunt Brothers' massive attempt to corner the silver market. Again in 2011, when Silver prices rose from $10 levels in 2008 to $50 levels, CME aggressively raised margin requirements for silver futures multiple times, particularly between April and May, with total increases exceeding 80%. Once is accident, twice is coincidence & thrice is a pattern. Effectively CME has used the same playbook thrice in the past 50 years to counter sharp rise in silver prices. Also physical demand supply was improving as seen in higher stock levels in London markets as well as falling Comex silver holdings. Silver ETP flows had also turned negative. Net redemptions have reached 899 tonnes in January so far, which may reflect a rotation to a preference to hold physical bars rather than an ETP. Industrial end uses have started to consider substitution options, with solar panel fabricators considering copper. To summarise, we believe a multitude of factors led to Friday's rout in Silver with CME margin hikes being the most important factor followed by Kevin Warsh selection as Fed Chair followed by comfortable physical demand supply market. To summarise, Silver has a history of CME intervention when prices rise sharply. But this price rise is not astronomical. Silver’s $120 level last week corresponded to an inflation-adjusted peak of $207 set in 1980. It baffles us why CME acts the way it does sometimes. We wonder why CME gets uncomfortable with silver price rise every time in last 50 years. We also wonder why there were no hedge fund/ bank accidents while Silver went from 25 to 120 in past two years & why there are none when it has shown a 12-sigma event on Friday. We were the initial bulls on Silver in Nov’24 when it was trading at $30 levels for a target of $40 levels which was achieved in Sep’25. https://macro-spectrum.com/trade-recommendation/long-silver For now, we believe Silver might find support near $40-50 levels & then consolidate around $50 but it will be years before it breaches $120 levels of last week. Once Silver prices break down, they tend to remain subdued for several years, possibly decades. Each new cycle ends where it started from. For e.g. in 1980s, prices fell from their highs of $50 levels to $5 levels and remained there for decades before it again picked up in 2005. In the 2011 melt up it went to $50 levels but then fell sharply to $15 levels and remained there till 2020 from where it again picked up. Now we expect the 1st support at $50 levels around which it should consolidate for several years before another up move starts. And if & when that up move starts, piercing through $120 levels, CME might not succeed in pulling it down the 4th time. One can manage derivatives trading by margin rules but physical price levels can’t be managed by exchanges. Broader themes such as dollar debasement, silver physical demand supply deficit, dedollarisation, AI/EV demand might help Silver stabilise around $50 levels. This consolidation is a healthy step for the next up move. But that up move might be years away. But the Tulip times for Silver trading is over. Traders should resist from expecting last year’s return from Silver any time soon. For now, paper has won over physical as seen in Friday’s rout.

Post the 21st Nov deadline on Rosneft & Lukoil by US sanctions, markets expected some fall in Russian crude exports. This reflected in Russian crude prices too as price differentials for all major Russian crude grades widened significantly. Urals DAP India and ESPO CFR China are now trading at their steepest discounts over Dubai crude in nearly a year. Yet real time shipping data tells a different picture. Imports into China, India, and Turkey, the three primary buyers, have continued at broadly stable levels since 21st Nov. Indian imports of Russian oil may have fallen modestly, but likely less than half of the August rate of 1.6 mmb/d, because Middle Eastern selling prices to Asia for December have fallen, not risen. For e.g. December official selling prices to Asia by OPEC’s two largest producers, Saudi Arabia (Arab Light and Medium) and Iraq (Basrah Heavy and Medium), have fallen by -USD 1.20 to -USD 1.40/bbl in December (see chart below). This would be the opposite of what one would expect if Indian refiners were substituting Middle East crude for Russian crude in significant size, heightening competition for that supply. We expect that the disruption to Russian imports might be largest in December, and then moderate during early 2026 as Indian refiners and oil traders involved as middlemen adapt their practices. To some extent, current US administration should be comfortable with such dynamics. This is especially critical as we approach the crucial 2026 US congress elections & affordability issues for US consumer take precedence over foreign policy needs. Sanctions enforcement has been known to be flexible in the past with this goal in mind, in relation to Iranian oil. Combined imports of Russian crude into China, India and Turkey post 21st Nov have remained broadly consistent with August–October averages, even edging slightly higher by roughly 50 kbd. Non-sanctioned companies increased their exports by almost 400 kbd during this period. Sanctioned companies saw a decline of about 350 kbd. The largest decline came from Lukoil, whose exports dropped by more than 0.5 mbd, falling below 100 kbd. Rosneft, in contrast, has sharply expanded its presence. This divergence may be attributed to deeper discounts and greater logistical flexibility offered by Rosneft. Chinese imports of Russian crude have also remained robust after the November 21st deadline. According to Kpler-tracked data, flows rose to 1.3 mbd in post 21st Nov period, up from an average 1.2 mbd during August–October. China’s decision to issue 7.4 Mt of additional crude import quotas to approximately twenty independent “teapot” refiners for use through year-end, equivalent to 1.4 mbd over the remaining 38 days, provides a significant boost to the sanctioned crude market. Russian refined product exports continue to run well below seasonal norms, holding near 1.9 mbd, compared to 2.4 mbd during the summer. But if there is a Russia Ukraine peace deal, we estimate Brent moving towards sub 60 levels from current 63.5 levels as an immediate response. In our opinion, Brent might eventually head towards $50 levels if there is a peace deal and OPEC supply continues at current elevated levels. We would expect a stronger immediate decline in refined product prices from a potential deal. Risk premium for European gasoil/diesel margin above its fair value has already dropped from $15/bbl last week to $7/bbl on peace talks headlines, and we see diesel margins declining by a further $6-$8/bbl if the peace talks succeed, with contributions from a lower risk premium and lower freight rates. Further fall in Brent prices can happen if US forces attack Venezuela and lead to change in political leadership. Eventually this will lead to removal of US sanctions and more supply from Venezuela. Venezuela currently produces 1mbpd supported by black market sales but a full stage recovery of peak production to 2.5 mbpd of 2011 levels can’t be ruled out.

With 2025 coming almost to an end, we see global commodities (ex-oil) set for more upside in CY26. Base metals demand supply mismatch with more demand arising from EV demand, AI data centres & supply suffering from adverse shocks such as seen in Copper currently. Copper prices recent rally are also being driven by the large difference between COMEX & LME prices as tariff worries on Copper resurface in CY26 as Trumps looks to revisit them. Aluminum is also looking set for further rally as China inches closer to the 45 million tonne capacity cap, and with issues around aluminium smelters securing commercially viable power contracts. We see Copper testing $12k/t levels by mid CY26 & Aluminium breaching $3k/t levels in early CY26. In precious metals, Gold seems to be forming a higher bottom around $4200/oz levels currently & we see a higher probability of it crossing $4500/oz levels by mid CY26. Both Gold & Silver seem to have found a new set of investors who are driven by recent strong price performance. The stablecoin issuer Tether has become a major new structural buyer of physical gold, now one of the world's largest holders outside of central banks, with reserves reaching approximately 116 metric tons as of Q3 2025. On Silver itself, technically $65 levels look attainable by mid CY26. Silver mine production has been decreasing for the past ten years, especially in Central and South America, due to mine closures, resource depletion and infrastructure challenges. The metal is increasingly used in electric vehicles, for AI components and in photovoltaics. Suffice to say, silver is extremely volatile and any bullish view gets stopped out after a weekly close below 48 levels. On Crude, our bearish view remains intact. Our base case sees Brent falling to $55 levels in Q1CY26 as OPEC+ continues to strive for gaining market share & Trump tries to ensure cheap gasoline prices before the mid 2026 House elections. Any Russia Ukraine peace deal might further pull prices lower, more so for refined products than crude itself. Reason being Russia refined products exports have declined by 0.9mb/d since March 2022 while Russia crude exports have remained nearly flat. Also product margins currently price a higher geopolitical risk premium than crude prices & freight rates may normalize if voyage journeys shorten. In summary, commodities prices except crude are likely to remain well supported & are set for more upside in CY26.

On 23rd Oct, the US Treasury Department sanctioned two Russian oil giants Rosneft PJSC and Lukoil PJSC as well as all entities in which they hold a direct or indirect stake of 50% or more, for operating in Russia’s energy sector. As a result, all US or US-based entities and individuals are barred from transacting with the sanctioned entities. Non-US ones may also be at risk of being penalized if found to be dealing with Rosneft, Lukoil or their sanctioned subsidiaries. Transactions involving the two firms need to be wound down by Nov. 21. So we decided to look at hard data on supply from these two entities. Currently there is 3.0mb/d of YTD Rosneft-Lukoil YTD exports (1.7mb/d from Rosneft seaborne exports, 0.8mb/d from Lukoil seaborne exports, and 0.5mb/d for oil via pipelines). But we believe the potential hit is likely to be smaller than the 3 mbpd for following reasons: 1) Exemptions for importers via licenses 2) Ongoing purchases of (discounted) Russian barrels 3) Reorganization of trade networks 4) Higher core OPEC production. We believe that these new sanctions are likely to result in narrower profit margins for Russian crude exporting entiites, as increased logistical and payment complexities may reduce profitability and prompt Russian producers to offer deeper discounts on their products. But overall export flows might not be impacted more than 0.5-1 mbpd. By destination, combined Rosneft and Lukoil year-to-date (YTD) estimated exports stand at 0.7mb/d for China, 1.2mb/d for India, 0.4mb/d for Turkey, and 0.8mb/d for other importers. In this we assume only India goes down by .4mb/d where as China remains the same. Hence the current 1.5 mbpd disruption factored in by Brent is more fear than reality. In September, exports from “other” Russian suppliers to India totalled about 260 kbd out of a total 1.6 mbd; these flows from alternative or unknown suppliers could expand to roughly 1.0 mbd as intermediaries step in, while 0.2–0.3 mbd may continue to be imported directly from sanctioned companies. However, the remaining 0.4 mbd may no longer be available to the Indian market. Given time, Russia has the capacity to potentially divert 0.8 mbd of its seaborne exports to countries like Egypt, Malaysia, Vietnam, Brunei, and South Africa. China’s blending capacity could absorb an additional 1 mbd of Russian crude. And then we have OPEC spare capacity of 3 mbpd. Hence The potential reduction in purchases of Russian oil may be temporary if progress towards a peace process to end the war in Ukraine were to be made and/or if energy affordability were to rank higher on Western policymakers’ priority list. For political reasons too, President Trump’s inferred preference for WTI oil is around $40-50/bbl seen by his previous public comments. With affordability issues at the centre of 2026 US mid-term elections, we don’t believe Trump is going to tolerate the recent rise in crude prices. In addition, in recent past, he has said that he does not like using crude sanctions because it shifts the global trade away from USD which he does not like. So unless Putin is thinking of enlarging the war theater, Trump will soon find an exit route for his new sanctions on Rosneft & Lukoil. Even if we are wrong on all our assumptions above, Putin might see the cost of these sanctions and accept a ceasefire along current war lines. That situation again supports our view of Brent returning to 60$ levels sooner than later. We will be proved wrong if Brent sustains above 70$ levels on a weekly closing basis. But by then we believe TACO will already be in play. Hence the current rally in Brent prices are a golden opportunity for oil producers to hedge.

Today OPEC might announce another increase in their crude output levels. We expect it to the tune of 400,000-500,000 bpd against current market estimates of 150,000-200,000 bpd. We believe Saudi is trying to corner market share of Russia which it hopes might be falling due to sanctions as well as India likely reducing imports from Russia due to US pressure. But is the Russian crude exports falling any time soon? We don’t believe it is even after repeated Ukranian attacks on it’s oil infrastructure as we detail below. So, both Saudi and Russia are trying to out do each other with more and more supply. For one it is about market share and for other it is about critical revenues in war times. Coming to physical demand supply, supply is growing by leaps and bounds. Brent oil prices have already fallen to $65 following Iraq seeing Kurdistan oil exports resume via Turkey after a prolonged 2-and-a-half-year suspension. We believe September marked a turning point, with the oil market now heading towards a sizeable surplus in 4Q25 and into next year. Middle East demand is declining seasonally, freeing up volumes for exports. As a result, the Middle East could potentially release an additional 0.5mbpd to global markets from October onward, simply due to reduced domestic demand. Stock builds are accelerating in the fourth quarter as refinery runs decline by 2.6 mbd from August to October due to maintenance, while demand softens by 0.9 mbd seasonally during the same period. Crude exports from the OPEC+ alliance jumped to the highest in 28 months in September, a sign that the volumes freed from seasonally softening demand and output hikes are starting to hit global markets. The loosening of Dubai crude, which turned Brent-Dubai from deeply negative back to positive in recent days can imply more medium-heavy oil supply being made available. Russian exports continue undiminished. Ukrainian drone strikes on Russian energy infrastructure have caused localized damage to refining capacity, restricting oil-product exports and driving Russian fuel prices to record highs. This, in turn, has freed up more crude for Russia to send externally, and despite multiple attacks on two port facilities and connecting pipelines, there are no indications of export disruptions; in fact, crude exports have surged to new highs. On demand side, Chinese SPR demand is supporting Brent prices to not fall below 60 levels. China's crude inventories, including oil on water and underground stocks, now stand at 1.25 billion barrels, surpassing the levels reached in August 2020 at the height of the COVID shutdown. Despite hopes for a diplomatic reset at the upcoming October 31-November 1 APEC Summit in South Korea, China remains cautious and continues to build oil reserves, with ample storage capacity still available. We also believe that keeping low oil prices is a key priority for current US administration. Given the multitude of existing and forthcoming sanctions on Russia, Iran, and Venezuela which together account for 20% of global supply, Trump administration wants to keep crude well supplied from OPEC. In this background, Saudi Prince MBS meeting with US president Trump in November might ensure sustained output increases from OPEC to keep crude prices subdued. To summarise, for all the above reasons mentioned above, we see sustained supply glut leading to our expectation that Brent prices might fall to 60 level by end CY25. While Saudi is trying to gain market share because it sees the sanctions on Iran, Russia & Venezuela, the above three countries continue to export crude through channels which defy sanctions. Today OPEC meeting is another milestone in this fight for market share.