The Houthis threatened to hit Saudi oil after the Saudis threatened their oil. We only have desalination plants left to threaten before we hit the top rung of the regional escalation ladder… and the risks are of a societal snake down to Mad Max style nightmares. The larger question is how this ends. Do the Saudis surrender to the Houthis - and have to yield what to them and Iran? Do Pakistan and Turkey defend Saudi, as they both busily —and S L O W L Y— complete the paperwork on their ‘Mecca Defence Pact’? Does the U.S. step in - and pre or post-midterms? Does Israel, the suggestion being only after its late October election, and only if Bibi loses (as he’s willing but not welcome)? In short, this could go on for weeks. It could damage Saudi far, far more. And far, far more violence will be needed to end this crisis even if it can be ended. Many other countries could be pulled into this mess. Higher for longer is the risk for energy prices, at least for physical, and bond yields…. and then global political and social stress. And there’s not a thing a central bank can do about it (save help fund a government to fight the Houthis like in the old days?)

Physical oil prices have reached UNPRECEDENTED levels as the global scramble for crude intensifies: Dated Brent, the price of physical crude for near-term delivery, surged above $154 per barrel on October 5th, the highest level in LSEG data going back to 1991, and remained above $149 last Friday. In effect, the spread between physical Brent and benchmark Brent futures has widened to a record of more than $50 per barrel, highlighting the growing premium buyers are willing to pay to secure immediate supply. Normally, longer-dated crude futures trade at higher prices because of storage costs and other factors, but the current supply squeeze has reversed this pattern, making near-term oil more expensive than future deliveries. The squeeze is intensifying as crude inventories shrink, tanker availability remains low, and shipping through the Strait of Hormuz remains dangerous, with winter approaching and demand for heating fuels rising. At the same time, Brent futures have risen far less than physical prices, reflecting expectations that oil flows through the Strait will eventually recover. Meanwhile, intensified Iranian attacks are making these shipments increasingly difficult to secure, while rerouting cargoes and securing tankers add further costs and delays. The global oil market is facing a historic supply squeeze.

🛢️This whole diesel release thing is largely performative. 🎭 For as long as US product remains highly discounted to European, EU reserve barrels will not get bought. Reserve barrels have been available for months and not been drawn in Europe for structural price reasons. I’m sure someone in Brussels or Washington is aware of this. Unfortunately the vast majority of people have forgotten that European reserves don’t sit in government controlled storage. There is no EU equivalent of the SPR. They are minimum reserves that commercial players are mandated to hold. That means they operate more like countercyclical capital buffers operate in banking. The same way that regulators releasing the CCyB doesn’t compel a bank to reduce its capital ratio or make additional loans, releasing the strategic reserve doesn’t compel European energy companies to sell diesel. (During Covid, for example, many banks didn’t want to tap strategic buffers even when they were told it was ok to do so.) If you want more EU barrels consumed, either EU governments intervene directly in the wholesale price (which they won’t as that involves paying off trading companies or appropriating the stocks directly) or the US must eliminate some of the regulatory factors that make it much more profitable on their end for US producers to sell barrels at a discount into Europe. Like RINs.

Macron: The Group of Seven intends to offer up to 100 million barrels of diesel and crude oil over four months 🇫🇷🇫🇷‼️‼️‼️‼️‼️‼️‼️‼️‼️‼️‼️‼️‼️

LOCAL SOURCES: SUPERTANKER WITH A CAPACITY OF 2.5 MILLION BARRELS, ILLEGALLY TRANSITING THE STRAIT OF HORMUZ, STRUCK APPROXIMATELY 8 KILOMETERS OFF THE COAST OF OMAN, CURRENTLY ON FIRE - MEHR NEWS

Wegovy pill launch in Mexico confirmed starting early November. (Confirmed by $NVO at EASD) There’s also credible talk about launch early November in France. But not 100% confirmed. Mexico has even higher share of population being obese than in US. And will be influenced by the halo effect from US launch. So far $NVO has priced Wegovy pill closely to that of injectable wegovy. If they mirror that in France then 25mg will be about 200 euro or about $230. That could potential make wegovy pill launch in France look more like launch in UK than launch in Germany. A bit more speculative could see some or all of the following countries also launch early November. Italy, Spain, Denmark and Sweden. If they all launch early November then we could potentially get close to 1 million consumers on wegovy pill by year end. Ex US Should that happen, then we would likely see wegovy pill run rate above $4B by year end. $LLY $VKTX

🇮🇷 Three tankers were struck by projectiles of unknown origin while transiting the Strait of Hormuz in the past 24 hours, according to incident reports from the UK Maritime Trade Operations (UKMTO). One of the crude oil tankers was hit while transiting inbound.

BREAKING: Iran's Foreign Minister Araghchi is now leaving New York for Tehran earlier than expected, with no talks and no breakthrough, per initial reports and a senior Iranian source. Araghchi already told IRNA hours ago that he would "fly toward Tehran in a few hours" and denied reports he was extending his stay for talks with the US.