As further evidence that the U.S. now controls worldwide prices, the United Arab Emirates (UAE) announced that it was leaving , which is a blow to Saudi Arabia. The UAE has complained for several years about crude oil quotas, so its departure from OPEC is not too much of a surprise. So, it appears that if and when the Strait of Hormuz is reopened that UAE will be boosting its crude oil exports.
I am now not expecting any crude oil price relief until October, when worldwide demand has its normal seasonal decline. It is obvious that crude oil prices are expected to remain high, since even if the Strait of Hormuz reopens, world energy and fertilizer markets have been profoundly impacted. Ironically, higher prices are good for stock markets around the world, since commodity-related stocks can act as an inflation hedge.
The Naval blockade on Iran is reaching a critical point, since Iran has minimal storage facilities, so its oil wells will have to be capped soon. Once Iran’s oil wells are capped, it could take months to reactivate these wells. The Wall Street Journal reported that Iran is struggling to store unsold crude oil and is now putting it in old tanks. If Iran has to cap its crude oil wells, it will curtail production for months, since restarting oil wells takes a lot of engineering. So, it will be interesting if the infighting within Iran will eventually result in economic sanity. The goal of the Naval blockade remains to cut off funds to the Iranian Republican Guard Corps (IRGC).
In general, the bottleneck at the Strait of Hormuz remains a problem for the rest of the world, since the U.S. is largely unaffected, with the exception of California, which imports up to 30% of its gasoline from India and South Korea.
Order backlogs have become a big deal for data center-related companies, since they continue to grow. Although there is a pushback against data centers, in the U.S., the vast majority of states are still allowing data center construction. Since data centers tend to go where there is fast internet, cheaper electricity, and cold climates to vent heat at night, Georgia, Idaho, Kansas, Louisiana, Michigan, Nevada, North Carolina, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah and Virgina are all big winners from the data center boom. There are simply too many states welcoming the data center boom, so I do not expect the data center boom to slow.