Oil Reserves Dangerously Low; ‘Much Higher’ Fuel Prices By Winter | Josh Young

David Lin (0:00)

It's now Monday, October 5th, and more tankers were hit near the Strait of Hormuz over the weekend. As Iran said, the strait will stay shut until its conditions are met. But crude oil and diesel have been falling in recent days. WTI crude is now trading just below $90 a barrel today, having fallen from $100 just a few weeks ago. And while diesel prices are still near historic highs in the US., WTI data shows that diesel now costs $6.32 a gallon as a national average after a record of $6.53 in September. This comes after G7 countries agreed to release 100 million barrels of diesel from their reserves. Will this downtrend continue? We're going to find out with our next guest, who's going to give us his outlook on crude oil and diesel heading into the winter at a time when America's reserves already sit at what is reported to be the lowest level since 1982

And the most important underlying assumptions still rest with the war in Iran. According to some estimates, tanker traffic in the Strait of Hormuz is normalizing. So why are prices still so high?

We'll go over several data sources today and try to sift through fact from fiction. Right now on Kalshi, traders are predicting that there's a 44% chance that the traffic in the Strait of Hormuz will return to normal before July 1st, 2027, next year. If you agree with those odds, a $50 trade could yield $101 if you're correct. This video was sponsored by Kalshi, the largest prediction market in the United States. Unlike a sportsbook, you're trading peer-to-peer on real-world events, from economic data to political outcomes, and the price moves based on public opinion, not a house. Go to the link in the description down below or scan the QR code here to get started, and new users who use my code LIN can get $25 in app credits when you sign up and trade $25.

Kalshi is CFTC approved and available in all 50 states, including California and Texas. Josh Young joins us now. He is a founder and CIO of Bison Interests, where he's invested in oil and gas stocks for nearly two decades. He returns once more. Josh, welcome back. Good to see you again.

Josh Young (2:14)

Yeah, thanks for having me back.

David Lin (2:16)

The question that a lot of people have is why oil prices are still high, despite numerous reports that tanker traffic is now normalizing. There's I was reading on multiple multiple reports on different media, but on Wall Street Journal last week, they were reporting that according to Morgan Stanley Research or Kepler Research as well. But they're recording some of the banks and it's almost at 95 or 98 percent, depending on the data you're looking at of pre-war traffic in terms of total volume on a weekly basis shipped out of the Gulf.

First of all, can you just verify whether or not the sources you're looking at confirming the same numbers? And if so, the question remains, why are prices still so high?

Josh Young (3:04)

Yeah, these are great questions. And I think there's sort of the real story, and then there's what's showing up in the Wall Street Journal and whatever on any given day.

And not to pick on them too much, but just sort of that whole set of mainstream media. And so the story they're picking up on is that on individual days and sometimes a couple of days together, there are these convoys of tankers that the US Navy has been bringing through the Strait of Hormuz. And then protecting them both on that transit and while they're doing ship to ship transfers of that oil to other tankers to then export out of the region. And so there'll be these moments where there's these surges of oil supply sort of reminiscent of what we saw back in May and June when there was that ceasefire between the US and Iran. And so there'll be days where there's really high flows that are not indicative of the overall flows. And it seems like it's sort of propaganda, right? There's a war going on still, unfortunately. And the US side, for various reasons, wants to try to show high oil flows and wants to suppress price. And so if it were true, like you're saying, that there were sustained flows near sort of pre-war levels, or I think President Trump and a couple of other folks said that they were actually above pre-war levels, you would think the oil price would be down a lot like we saw in May and June, down to let's say $70 WTI and it's not there.

But I think the reason it's not there is because these aren't sustained flows. And then there is the logical response, which is when you claim high flows and you achieve some somewhat elevated versus let's say flows two months ago, you end up having the IRGC go and attack a whole bunch more tankers. And unfortunately, there were delayed reports of those tankers. And the reason I say unfortunate is it may have actually come at human cost where with the delayed reports, maybe more tankers went through than would have if they knew that tankers were getting attacked and maybe more people were hurt or died because there was this bad information that was getting reported about it supposedly being safe and all these tankers getting through unharmed. When it looks like probably about five percent of tankers that went through got hit and a high portion of those were either disabled or people were hurt or died. And so, you know, really sort of, I think, an unfortunate human element to this misinformation campaign.