Iranian Parliament Speaker Mohammad Bagher Qalibaf’s post on the X platform a few days ago about oil futures prices, and their comparison with US Treasury bonds, aroused widespread interest from experts and those concerned with developments in the war between Washington and Tehran.
In a previous tweet, Qalibaf warned the American citizen of the rise in gasoline prices, as a result of US President Donald Trump’s policies towards Iran, with a mathematical equation indicating that oil prices will be higher as a result of the cessation of navigation in the Strait of Hormuz.
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“Trade on impressions”
Qalibaf said in his recent post about oil prices that “digital trading in oil based on impressions,” as he described it, is similar to “trading US Treasury bonds based on impressions,” as the two are similar in that they are “trading on paper.”
In his publication, Qalibaf points out the difference between spot oil, whose prices are determined based on what is actually available in the markets according to supplies ready for delivery, and paper oil and treasury bills.
Dr. Nawar Al-Saadi, a specialist in international economics, said in an interview with Al Jazeera Net that Ghalibaf’s publication “illustrates the duality of global markets, especially when geopolitical shocks occur related to energy security and vital corridors such as the Strait of Hormuz.”
Al-Saadi added that Qalibaf’s post highlights the deep gap between the “paper market,” which is driven by speculation, futures, and impressions, and the “physical market,” which is governed by actual supply chains.
Ghalibaf’s post confirms “a solid fact,” according to Al-Saadi, which is that “oil has an intrinsic value because in the end they are real physical shipments that must be delivered, and no financial engineering can compensate for their actual absence.”
Oil price gap
Bloomberg Network reported that global oil markets are witnessing a feverish race by oil refineries and traders to buy oil available for immediate delivery in the markets in light of the shortage in supply as a result of the war in the Middle East.
Bloomberg explained that the prices for immediate delivery of crude oil shipments have reached unprecedented levels, while the futures market is still relatively low, as shipments scheduled to be delivered in the coming weeks were traded at prices reaching $140 per barrel.
The rush by oil traders and refiners in various countries to buy oil available in global markets, according to Bloomberg, explains the extent of the shortage in oil supply as a result of the decline in supplies through the Strait of Hormuz after the outbreak of the American-Israeli war on Iran.
In the same context, the Financial Times newspaper indicated that the prices of crude oil shipments available for immediate delivery rose, during the Iran war, to their highest levels since 2008, and during the war period exceeded $130 per barrel, amid concerns in the oil markets about the availability of actual supplies as the war continues.
Brent crude futures fell 21 cents, or 0.2%, on Wednesday, after Trump announced the extension of the truce with Iran, to $98.27 a barrel after touching $99.38 earlier in the session, according to what Reuters reported.
US West Texas Intermediate crude futures fell 28 cents, or 0.3%, to $89.39, after rising to $90.71.
Concerns of consuming countries
Dr. Mustafa Al-Bazarkan, Director of the Center for Energy Information and Studies, said in an interview with Al Jazeera Net that the Speaker of the Iranian Parliament is trying to raise concern among oil-consuming countries, by focusing on the difference between oil futures contracts and spot contracts to buy oil.
Al-Bazarkan added that the oil markets are waiting for the American and Iranian sides to sit at the negotiating table, awaiting a decision to open the Strait of Hormuz, and awaiting decisions regarding sanctions on Iranian oil.
For his part, Dr. Mamdouh Salama, an oil expert, explained to Al Jazeera Net that what Qalibab meant was that digital oil is just “oil on paper that has no value, but the real oil is the one that passes through the Strait of Hormuz and the world’s economy relies heavily on it.”
Comparison with Treasury bonds
Salama added that paper oil is no different, in Qalibaf’s opinion, from US Treasury bonds backed by a paper dollar, on which the US economy depends, which makes it “at risk of collapse if the US bond market collapses,” according to what Salama said.
He pointed out that there is a trick that the US Treasury resorts to, with a decrease in demand for bonds, as it buys these bonds and then adds new bonds to them and re-offers them in total in the markets to give the impression that there is a great demand for them.
It is noteworthy that the total value of US Treasury bonds amounted to 38.9 trillion dollars, according to official figures of the US Treasury Department, which is a huge amount that means that any vibration in the US bond market will have wide effects on the American and global economy, according to what Salameh confirms.
For his part, Al-Saadi believes that the comparison proposed by Qalibaf between digital oil and US Treasury bonds, which are considered the traditional safe haven in times of crises, is a very important economic approach. He argues that “these bonds depend entirely in their value on confidence and monetary policies without a solid physical cover.”
He added that Qalibaf’s post has a political context, as it represents a “show of force,” according to Al-Saadi, and sends a clear message, which is that “the keys to the crisis are in the hands of those who control the actual waterways, and not in the hands of those who manage the financial markets in Western capitals.”
Al-Saadi explained that Qalibab’s implicit political message directed to decision-makers on the Wall Street Stock Exchange is clear, which is that “control over the real physical corridors of energy remains the most powerful tool of influence, and paper markets with all their complexities will remain fragile in the face of any real interruption in oil supplies.”
