Summary4 min read

Podcast Summary: Oil Markets Are Even Tighter Than They Appear

Podcast: Thoughts on the Market
Host/Speaker: Martin Ratz, Global Commodity Strategist, Morgan Stanley
Date: March 24, 2026

Episode Overview

In this episode, Martin Ratz delivers an urgent update on the state of global oil markets, emphasizing the severe impact of the Strait of Ramus shutdown, three weeks into the Iran conflict. He outlines how the ongoing disruptions have created a much tighter oil market than initially appeared, with ramifications far beyond crude prices, extending into refined products, supply chains, and the broader economy.

Key Discussion Points & Insights

1. Magnitude of Supply Disruption

Strait of Ramus Shutdown
- Over 20% of global oil supply is currently disrupted, “double the scale of the Suez crisis in the 1950s.”
- Normal flow: ~35 tankers/day; now: “closer to 0 to 2.”
- [00:29] “That amounts to a shock. In fact, we estimate that this event has disrupted roughly 20% of global oil supply.”
Immediate Response & Buffering
- Initial adaptation: Oil kept moving by using up floating storage inside the Gulf (“over 120 million barrels”).
- That buffer is now full; new loadings have “effectively stopped.”
Production Cuts
- Once storage maxes out, producers cut output. Currently, “about 10 million barrels per day of upstream oil and gas production is now offline.”

2. Partial Workarounds & Their Limits

Available Mitigations:
- Pipelines bypassing the Strait
- Strategic reserve releases
- Possible future naval escorts
Limitations:
- “Unfortunately, none of these fully solved the problem.”
- After all offsets: “the market still faces a shortfall of around 10 to 12 million barrels per day.”
- [01:33] “That is more than three times the supply shock that the market feared in 2022, when Brent oil prices surged to around $130 a barrel.”

3. Wider Impacts Beyond Crude Oil

Refined Product Shortages
- Crude can sometimes be substituted, but refined products (jet fuel, petrochemical feedstocks) are “much more specific” and “harder to replace quickly.”
- Europe: 37% of jet fuel needs are imported; those flows “have now declined sharply.”
- Middle East exports of naphtha to Asia: “have fallen from about 1.2 million barrels per day to almost zero.”
- Marine fuel in Singapore: “some fuels exceeding $250 per barrel.”
- [02:38] “Once fuel shortages hit logistics, the disruption spreads beyond energy to affect the movement of goods across the economy.”

4. Scenarios and Price Outlook

Two Broad Scenarios:
1. A Rapid Reopening
  - If the Strait reopens in 1–2 weeks, the system won’t “snap back.”
  - “There’s what we call an air pocket in the system.” This means delayed shipments, empty inventories, disrupted supply chains.
  - Oil prices likely to remain elevated through Q2–Q3.
  - [03:13] “In that case, oil prices are still likely to stay elevated throughout the second and third quarters, rather than quickly returning to pre crisis levels, which were about $70 per barrel at the time.”
2. Prolonged Closure
  - Prolonged disruption leads from “substitution to rationing.”
  - Demand must fall, requiring even “much higher prices,” typically $130–150 per barrel.
Price Forecast Revision
- New Morgan Stanley base case:
  - Brent to average $110/barrel in Q2
  - Eases to $90 in Q3 and $80 in Q4
- [03:42] “But it’s key to realize that reopening the strait is not the same as repairing the system. This supply chain shock to the oil market will take time to unwind.”

Notable Quotes & Memorable Moments

On the Scale of the Crisis:
“We estimate that this event has disrupted roughly 20% of global oil supply, double the scale of the Suez crisis in the 1950s.” — Martin Ratz [00:29]
On Unprecedented Shortfalls: “The market still faces a shortfall of around 10 to 12 million barrels per day. That is more than three times the supply shock that the market feared in 2022.” — Martin Ratz [01:33]
On Supply Chain Ripple Effects: “Once fuel shortages hit logistics, the disruption spreads beyond energy to affect the movement of goods across the economy.” — Martin Ratz [02:38]
On the Difficulty of Rebalancing: “Reopening the strait is not the same as repairing the system. This supply chain shock to the oil market will take time to unwind.” — Martin Ratz [03:42]

Segment Timestamps

00:00–00:29 — Introduction, Strait of Ramus context, scale of tanker slowdown
00:30–01:33 — Magnitude of global oil disruption, storage buffer, producer cutbacks
01:34–02:38 — Limits of workarounds, refined product shortages, implication for global supply chains
02:39–03:42 — Scenarios for reopening vs. prolonged closure and adjusted price forecasts
03:43–End — Closing thoughts, summary of key messages

Conclusion

Martin Ratz delivers a clear, data-backed assessment of the oil market’s fragility due to the Strait of Ramus disruption, highlighting both the historic scale of the supply shortfall and the likelihood of persistently high energy prices. He warns that even a swift resolution won’t restore pre-crisis normalcy, as structural shocks and logistical bottlenecks will continue to reverberate through oil markets and the broader economy well into the year.

Loading summary

Transcript2 lines

[00:01]
A
Welcome to Thoughts on the Market. I'm Martin Ratz, Morgan Stanley's global commodity strategist. Today, an update on the global impact of the Strait of Ramus shutdown. It's Tuesday, March 24, at 3pm in London, more than three weeks into the Iran conflict and the Strait of Hormuzk disruptions. The numbers are striking. Normally, around 35 oil tankers leave the Gulf each day. Today, that number is closer to 0 to 2. That amounts to a shock. In fact, we estimate that this event has disrupted roughly 20% of global oil supply, double the scale of the Suez crisis in the 1950s. Now, you might think, can't the system adapt? Can't oil just flow another way? At first, oil kept moving by being stored on ships already inside the Gulf. But that buffer is now full. Floating storage has surged in the area to over 120 million barrels, and new loadings have effectively stopped. Once storage is filled, producers have no choice but to cut output. And that's exactly what we're seeing. About 10 million barrels per day of upstream oil and gas production is now offline. Now, once we reach that point, the Armuz closure becomes a real supply loss. There are some partial workarounds. Pipelines that bypass the Strait, Strategic reserve releases pipeline, possibly naval escorts at some point to help ships move along. But unfortunately, none of these fully solved the problem. Even after accounting for all these offsets, the market still faces a shortfall of around 10 to 12 million barrels per day. That is more than three times the supply shock that the market feared in 2022, when Brent oil prices surged to around $130 a barrel. And beyond crude oil, the supply strain is showing up even more in refined product now. How so? By comparison, crude oil is still flexible. One barrel can sometimes be substituted with another. But refined products like jet fuel or petrochemical feedstocks are much more specific. They're harder to replace quickly, and we're already seeing acute shortages. Europe relies on imports for about 37% of its jet fuel needs, and those flows have now declined sharply. Middle east exports of naphtha, a key input for plastics and chemicals, to destinations in Asia, have fallen from about 1.2 million barrels per day to almost zero. And in shipping hubs like Singapore, marine fuel prices have surged dramatically, with some fuels exceeding $250 per barrel. Once fuel shortages hit logistics, the disruption spreads beyond energy to affect the movement of goods across the economy. So where does this leave us? We envision two broad scenarios. First, a reopening. Even if the Strait reopens, relatively quickly, say within one to two weeks. The system doesn't just snap back. There's what we call an air pocket in the system, a gap created by delayed shipments, empty inventories and disruptive supply chains. In that case, oil prices are still likely to stay elevated throughout the second and third quarters, rather than quickly returning to pre crisis levels, which were about $70 per barrel at the time. A second scenario would be a prolonged closure. If the disruption continues, the market shifts from substitution to rationing. And rationing means demand has to fall. Historically, that only happens at much higher prices, typically in the range of $130 to $150 per barrel. Now, given all this, we've revised our base case forecast higher. We now expect Brent oil prices to average around $110 per barrel in the second quarter, easing only slightly to $90 in the third and $80 by the fourth quarter. But it's key to realize that reopening the strait is not the same as repairing the system. This supply chain shock to the oil market will take time to unwind. Thanks for listening. If you enjoyed the show, please leave us A review wherever you listen and share thoughts on the market with a friend or colleague today.
[04:07]
B
The preceding content is informational only and based on information available when created. It is not an offer or solicitation, nor is it tax or legal advice. It does not consider your financial circumstances and objectives and may not be suitable for you.