1/5 Where Is the Demand Destruction? tl:dr - Asia because they are reliant on Middle Eastern Crude oil, and it is now over $150/barrel. This is keeping (for now) the American and European grades "only" ~$100. (% gain since the war)

2/5 The chart below shows tanker transits through the Strait of Hormuz, the world’s most critical energy artery, have effectively flatlined to zero since the conflict began on February 28.

3/5 This represents a sudden removal of roughly 20% of the world’s crude oil supply. While Saudi Arabia’s East-West pipeline to Yanbu is expected to ramp up from 2M bpd to its max capacity of 7M bpd soon, it cannot replace the ~21M bpd that typically flow through the Strait.

4/5 With one-fifth of the world’s oil essentially stranded, a significant portion of global consumers must stop using oil immediately—a process known as “demand destruction.” We can see where this is happening by looking at the price of various world crude oil grades.

5/5 While the U.S. (green) and Europe are struggling with $100 Brent (cyan), the Middle Eastern “sour” blends that power Asia have decoupled from Western benchmarks (blue, red, and orange). Because Asian refineries are chemically tuned to these specific grades, they are forced to bid astronomical premiums for the limited barrels that reach the Red Sea or out of the Persian Gulf. With physical prices for these grades hitting $150 per barrel, Asia has become the world’s shock absorber. By pricing out marginal industrial and transport users in the East, the market is balancing its global books, sparing the West from even more catastrophic price levels—for now.