General Discussion

That is the whole point of futures. Risk reduction. They risk paying more than spot if prices go lower but that is offset by insuring they will not pay more if the price goes higher.

"the market seems to be buying" the admin's BS. No they aren't. The backwardation of futures prices is the result of a super complicated ethereal equation that factors and weights all the ways things could get worse against all the ways they could get better or stay the same. Oil went to $120 on uncertainty but declined as more information became available and events played out.

Turns out that even though "20% of oil flows through the Strait" there are other ways it can flow and other sources that can replace what is suppressed. Canada, Russia, Brazil and KSA are not constrained by whatever happens in the Strait and they all started pumping more and shipping via routes that don't involve the Strait. In the 1973 embargo 7% of oil was cut off and prices spiked, rationing went into effect, we all parked the Camaro and bought Hondas, etc. What is different now is that there is far more capacity to pump oil and very little of that capacity is constrained by the Strait. IOW 20% of flow is/was not 20% of oil production capacity. Prices went high enough to make other sources and routes profitable.

There is a scenario where oil prices crater (again, like April 2020) when the Strait is fully open because all this other capacity and production has ramped up.

Oil trading is overwhelming conducted by people who DO understand these things and have much better info than what is available to retail traders. Prices are declining because traders are seeing all the ways that production and transport is reacting to and overcoming the throttling of the Strait. Not because of anything Trump says or does not understand.