Q+A: Why oil prices are moving faster than the facts
episodePreviously titled “Q+A: Oil prices are moving faster than the facts” — renamed by the publisher on Aug 2, 2026
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Are oil prices moving faster than the underlying facts and why does that matter?
Welcome to Fear and Greed Q&A, where we ask and answer questions about business, investing, economics, politics and more. I'm Sean Aylmer. Oil prices have swung wildly over the past few months. Markets initially cheered a ceasefire between the US and Iran, sending crude prices tumbling. But renewed fighting quickly reversed much of that optimism. The question is whether markets are reacting too quickly to the headlines and what higher oil prices for longer could mean for inflation, interest rates and investors. Remember, this is general information only. You should always seek advice tailored to your circumstances before making investment decisions. Brian Arcees is Portfolio Manager at Ford Asset Management and joins me now from KL, I think, not Singapore.
I said I have Singapore in my notes. Brian, are you in Kuala Lumpur? Is that right? I am. I am at the moment in Kuala Lumpur. Fantastic. Well, welcome back to Fear and Greed. You've recently published commentary with the headline, Oil Prices Move Faster Than Facts.
What do you mean by that? Well, in our minds, I mean, as you said during the introduction, we saw oil prices move up quite quickly as fighting began in Iran. But we saw them move back down nearly as quickly or even more so than they had moved up. And in our minds, that was prices moving much more quickly than the fundamentals were actually changing on the ground. Things don't come back online as quickly as investors would hope, but certainly markets were pricing in that markets would return to the state of the world pre-conflict. And in our minds, that's just likely to take much longer than at least what was previously priced in.
So their whole idea, I mean, when I got back down to 75 US dollars, I mean, as of yesterday, they're around 90 or thereabouts, but they just, they dropped too far too quickly. That's sort of the gist of it. Is that right?
Correct. Correct. Exactly. I mean, I think a lot of things were working towards putting a cap on oil prices and giving investors a a bit of confidence that the market wouldn't become too seized. I mean, China had really decreased imports. The U.S. and other countries around the world had released a significant amount from their respective strategic petroleum reserves. And then also, Though oil was obviously impeded from getting out of the Strait of Hormuz, there are and were a number of workarounds that really had allowed at least some of that capacity, somewhere between a third and half perhaps, to come out of the Gulf through other means, including through the Red Sea. All of those, I mean, China does need to begin to import oil again.
We are getting to the lower end of the comfort range of how quickly countries would want to draw down their strategic petroleum reserves. And then I think lastly, to be honest, workarounds through the Red Sea may or may not be available on a go-forward basis. I think a lot is still in flux. So it makes sense for oil to stay higher for longer in our minds.
Tell me, with the oil price, how much of it is about the physical supply, literally the physical supply, and how much of it is sentiment?
It's a great question, and I think it really is a mix. I mean, ultimately, over the long term, it obviously is dictated by the physical supply. I come down to nearly zero for a period of time. And so spot prices within the Gulf during the first portion of the conflict had gone as high as $150 a barrel, for example. So that really is the physical market being quite curtailed. But at the same time, what we saw, and really the decrease in oil prices so significantly and so quickly at the beginning of the sort of quote unquote ceasefire, really is sentiment driving a lot of that. Right. More than oil fundamentally returning to the market. It was simply investors becoming much more relaxed about the situation.
And obviously, in our minds, more relaxed than they likely should have been or even should be today.
So. Taking that a bit further, let's say the Strait of Hormuz opens. Off we go. I would imagine there's a bunch of things like the shipping routes, what insurers are thinking about putting policies on those vessels going through the area.
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