Iran’s war politics are keeping oil markets in an uproar
Odessa oilman Kirk Edwards says the war with Iran and the politics surrounding it are keeping the energy industry in a bind — and he’s increasingly concerned that Washington’s habit of teasing a nuclear agreement is distorting an already fragile market.
“Iran is now making demands of the United States,” Edwards said. “How did we get here?”
Tehran, he notes, is reportedly demanding compensation, sanctions relief, changes to the American military presence in the Gulf and greater control over passage through the Strait of Hormuz.
“The United States is the strongest military and economic nation on Earth, yet Iran is attempting to dictate the conditions under which one of the most important waterways in global commerce will operate,” he said. “That should concern every American. But there is another issue that deserves attention.”
Edwards said the Trump administration has repeatedly told the American people and global markets that an agreement with Iran was imminent, close, nearly completed or about to be announced.
“By mid-June multiple major news organizations were already reporting that President Trump had made some version of that claim roughly 40 times,” he said. “And the statements continued.
“Earlier this week Treasury Secretary Scott Bessent again suggested an agreement could be announced within a day or two. Energy Secretary Chris Wright and Commerce Secretary Doug Burgum echoed those terribly erroneous talking points. Oil prices fell. The agreement did not happen.”
Edwards said that at some point this stops being harmless optimism.
“These statements move markets,” he said. “Oil producers make drilling decisions based on prices. Companies hedge billions of dollars of future production. Service companies make hiring and equipment decisions. Investors and producing communities are affected.”
He asked how many times Washington can tell the world a deal is imminent before the market stops believing it.
There is also a bigger question that he says he cannot reconcile as a petroleum engineer. The International Energy Agency says cumulative Middle Eastern oil supply losses from this crisis have exceeded 1.3 billion barrels. Before the conflict, roughly 20 million barrels per day of oil and products moved through Hormuz. Yet West Texas Intermediate crude oil remains at around $80 per barrel.
“How?” Edwards said. “I understand inventory withdrawals, strategic reserves, rerouting barrels, demand destruction and alternative supply. But 1.3 billion barrels is not a rounding error.”
Edwards said it is fair to ask whether the futures market is accurately reflecting what is happening in the physical oil market.
“And perhaps the biggest question is this: What happens when the inventories masking this historic supply disruption finally run down?” he asked.
“America should be negotiating from strength. Iran should not be setting the rules for one of the most important international waterways on Earth.”
He said the American government should stop announcing that an agreement is imminent until there is actually an agreement to announce.
“The oil market can handle bad news,” Edwards said. “What it cannot efficiently price is a continual stream of supposedly imminent agreements that repeatedly fail to materialize.
“Iran is testing American resolve. The oil market is testing economic reality. I am not convinced that either test has reached its conclusion.”