Landry Luc

Time to take prompt oil profits. I am taking profits on prompt oil and products into the midterms. The regime trade stays on. It comes back to the two trades I described this morning. The war trade pays on the price of the barrel: prompt crude, products, the windfall on barrels already in the ground. It is eight months old. The regime trade pays on the cost of replacing the barrel: rigs, services, local production, bypass capacity, firm power and storage. It is the structural supercycle call we made in 2020, driven by deglobalisation, debasement and electrification, compounded by underinvestment. The war brought that trade forward, but it did not create it. A reminder of the scorecard: commodities are the best-performing asset class of the decade: the S&P GSCI has returned about 260% since we called for the supercycle in October 2020, against 121% for the Nasdaq and 120% for the S&P 500. Commodities were already ahead of both before Hormuz - it just widened the gap. Why take profits now? Escalation would be so catastrophic for food and fuel supply chains that neither side will pursue it, while a lasting deal is equally elusive. The compromise is managed instability, with Schrödinger's Strait at the heart of it: a Strait that is neither open nor closed. That caps the prompt barrel. It does nothing to cheapen the next one. It has been a fantastic run. USO is up 144% this year. Energy, where the refiners and integrated majors carry the product exposure, is up 60%, the fifth-fastest run to a 50% gain since 1990, and the Munificent 7 did it on a Sharpe ratio around 2. The war trade has paid. My view on the regime is unchanged. Eight months into the closure, the world is rebuilding its physical system around the expectation that the Strait closes again: Gulf producers loading outside it, Italy restarting nuclear, the Dutch reopening North Sea gas, China sitting on 1.4 billion barrels. These are long-term investments in energy security. None of it dissipates when the ships come back. The investment to support that regime has barely begun. Oil is near $100 and drilling has hardly moved. Upstream investment is still well below its 2015 peak and refining investment sits at a decade low. Calendar 2027 Brent trades above every forecast on the Street: a long-term supply problem that nobody has yet been paid to fix. A supercycle is a capex cycle. The owners of the molecule get paid first. The builders get paid next. Prompt oil prices a war. Long-dated oil prices a regime. Trade the first, own the second. I have cut most of my prompt oil and product exposure and kept a small position in case hostilities resume after the midterms. If prompt prices fall from here I will not be in a hurry to rebuild them. The money has moved to the services and producers that build the regime. The first leg has paid. The second is still being built. These are my personal views and positions, not investment advice.