- Leverage & Inverse ETPs
- Instruments
- White Label
- Why Us
Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.
On the 10th of September, Houthi forces launched a surprise offensive1 to capture the seaport town of Mokha (the city that gave its name to “Mocha” coffee). With this move, the Houthi alliance tightened2 and enforced harder its embargo on Saudi shipping – mostly vessels carrying crude oil transported from extraction sites in the east and brought to the Red Sea port town of Yanbu via the 1,200-km East-West pipeline to bypass the Persian Gulf route hobbled by battles being waged between the US/Israeli coalition and Iran around the Strait of Hormuz. On the 14th of September, reports emerged that drones possibly launched from Iraq destroyed parts3 of the pipeline in two areas around Riyadh and Medina.
A Saudi refinery at Yanbu was already attacked by Houthi forces in March, with little reported lasting effect. The closure of the pipeline, however, added pressure: at least 5% of global crude oil supply flowed through the pipeline and Yanbu to the rest of the world. The Strait of Bab el-Mandeb – which the Houthis now are effectively choking – accounts for 11% of global crude oil supply and 8% of global LNG supply.
Websim is the retail division of Intermonte, the primary intermediary of the Italian stock exchange for institutional investors. Leverage Shares often features in its speculative analysis based on macros/fundamentals. However, the information is published in Italian. To provide better information for our non-Italian investors, we bring to you a quick translation of the analysis they present to Italian retail investors. To ensure rapid delivery, text in the charts will not be translated. The views expressed here are of Websim. Leverage Shares in no way endorses these views. If you are unsure about the suitability of an investment, please seek financial advice. View the original at
Source: Al Jazeera
The near-total encirclement and control over energy flows from and through the Middle East has massive consequences for the global availability of energy and critical material such as fertilizer, gases used in semiconductor manufacturing, and more.
The more pressing concern for well over a few billion people in the world is, of course, energy. And nowhere is this more pressing than with some of America’s historically enduring all-weather allies.
The Bill Being Paid Within the US Orbit – But Not the USEurope has historically received the massive volumes of gas it needed for heating, et al through pipelines snaking across the continent from Europe. Shortly after the Russo-Ukrainian conflict began, the undersea Nord Stream pipelines supplying Russian gas via the Baltic Sea to – and through – Germany were destroyed in a clandestine operation that a number of Ukrainian individuals have recently been indicted4 for (with a number of suspicions5 that they were operating at Kyiv’s behest).
With no cheap Russian gas flowing through, Europe had to rely on imports from elsewhere including the Middle East. The trajectory of Dutch TTF (“Title Transfer Facility”) gas futures contracts – which effectively forms Europe’s gas pricing benchmark – versus the price of gas in the US-based Henry Hub is quite telling:
Source: Leverage Shares analysis
From the start of the year (which includes some of the coldest months across Europe) till date, TTF Futures prices have grown by nearly 200%. With Russian gas gone, Europe switched to the next largest source of gas, i.e. the Middle East. With the Middle East now effectively being choked, Europe is competing – along with the rest of the world – for gas not originating from either Russia or the Middle East while forecasts indicate that the upcoming winter will be colder than usual, thus creating additional demand.
The US is the world’s largest producer of natural gas but it cannot match the deficit in supply: exporting gas requires cooling it to -162°C (-260°F) to turn into a liquid at specialized, multi-billion-dollar terminals (primarily along the U.S. Gulf Coast) so it can be loaded onto specialized ocean tankers, sent over and warmed back up at import terminals. The total U.S. operational LNG export capacity is currently about 18.7 billion cubic feet per day (Bcf/d). The United States supplies6 62% of Europe’s total LNG imports, which is roughly 8.7 Bcf/d. Meanwhile, Norway supplies another 30-35%.
All matters considered, there shouldn’t be an issue but the reason why TTF has steadily risen is because Europe is locked in a fierce, premium bidding war with Asian buyers – who were hitherto reliant on the Middle East – for available American or African LNG cargoes. Institutions7 note that TTF must maintain elevated levels to outprice Asian demand and physically force gas toward European shores. Ergo, US-based gas exporters have arguably been making bank.
While additional export facilities are estimated to go live in the US from mid-2027 onwards, the additional capacity will continue to create price surges since damaged facilities in the Middle East cannot be expected to be repaired quickly enough.
Now, the Henry Hub spot versus futures price trend tells its own sub-story: while spot is running near par, Henry Hub gas futures price is nearly 20% down in the Year Till Date (YTD). While Henry Hub natural gas prices spiked in January 2026 due to extreme freezing weather from Winter Storm Fern, which drove up heating demand while simultaneously freezing wellhead production, it is currently operating at a glut that cannot be exported currently, thus creating a slight displacement between spot and futures.
Of course, US consumers are not seeing the benefits of plentiful natural gas supply, 38-40% of which is used in electricity generation. Increased demand from AI datacentres, ageing infrastructure leading to rising price of domestic transport of gas, and the rebuilding of grids impacted by repeated wildfires and storms have resulted in average U.S. residential electricity prices climbing by 4% to 5% over the past year. Given that this is a far cry from the 200+% price hikes in securing supply that Europe and Asian countries are facing for their needs, this is everybody else’s problem more so than America’s.
When it comes to petrol and diesel, however, it’s a different story.
The Bill Everybody Around – and Including – the US is PayingCrude oil doesn’t nearly have as many restrictive conditions around transport. The chokehold on Middle East energy supplies shows this clearly in the price trajectory of the European/global Brent price versus the US-derived WTI:
Source: Leverage Shares analysis
Both WTI and Brent are set to nearly double in price in the YTD within the next few days.
Early on in the opening stages of conflict initiated by the US in the Middle East, the country began to draw on its substantial Strategic Petroleum Reserve (SPR) as part of a 400-million-barrel coordinated by the International Energy Agency across the globe and primarily centred around the US and its allies in a bid to containing spiking oil prices. Against the 172-million-barrel authorization signed into effect by President Trump on the 11th of March, a little over 128 million barrels have already been drawn out.
Now, the SPR is stored at 60 salt caverns thousands of feet underground at four major sites along the Gulf Coast in Louisiana and Texas. In its May report8 regarding these caverns, the US’ Government Accountability Office (GAO) stated that “repeated partial drawdowns followed by refill can leach a single part of a cavern repeatedly, leading to undesirable shapes.” Every drawdown cycle, it continued to say, expands cavern volume and reduces the spacing between caverns within the salt dome. This ultimately reduces their long-term viability for utilization.
The Trump Administration’s Energy Department officials have stated that at least 70 million barrels must remain in the reserve to safely manage the caverns. However, this number has been disputed by both past advisors to past Presidents and industry specialists. Texas A&M University petroleum engineering professor Siddharth Misra stated that while seventy million barrels is the strict physical minimum needed at the top of the caverns to keep the extraction pipes safely submerged in oil rather than water, the practical operational floor for the crude inventory is between 250 million and 300 million barrels. When the inventory drops below 300 million barrels, the SPR loses its ability to pump oil at rapid speeds to address emergencies. The system’s pipes and pumps could also get damaged as the oil layer thins at the top and sludge rises toward the extraction intake at the cavern ceiling.
Fresh water is often pumped into the caverns during rapid drawdowns, which dissolves the salt walls, thus greatly increasing the geological risk of a structural cave-in. The SPR was originally designed for five full drawdowns. Instead, the US government has executed dozens of large and small releases over the past 40 years.
A number of Energy Department officials have concurred with this view and had informed the GAO that they are “holding the SPR infrastructure together with ‘Band-Aids,’ and that it is uncertain how long they will hold.” In December 2025, GAO found that more than a quarter of the SPR inventory wasn’t available for drawdown due to “a combination of construction outages and cavern outages”. GAO found that as of December 2025 the SPR could draw down at only about 61% of its design rate, and its ability to accept returning crude had fallen to 56% of specification.
As of right now, the SPR is operating very close to inoperability and elevated failure risk.
Source: Leverage Shares analysis
As per 42 U.S Code § 6241(h), the president cannot order limited, non-emergency drawdowns (up to 30 million barrels over 60 days) once the reserve is below 252.4 million barrels. While drawdowns have decreased in the past couple of weeks, trends established during the course of the US’ conflict with Iran marked a drawdown rate of roughly 3–5 million barrels a week. If this rate were to resume, the facility can be availed for about two more months. If Trump were to release the final 39-million-barrel tranche from the March IEA agreement, the level would land near 243 million — which is well below the floor. After this, oil moves only on a formal declaration of a severe energy supply emergency.
In a bid to contain the energy market from panicking or perhaps with an eye on the midterms, Trump made what could be (charitably) described as a groundbreaking announcement on the 30th of August: U.S. majority control of more than 65 billion barrels of proven oil reserves in Venezuela “at zero cost to the United States”. Venezuelan crude, according to the President of the United States, would refill the SPR very shortly.
The problems with these statements are similar to nearly every announcement made by the administration in recent times – with Trump’s 38 declarations9 of a deal being made (or close to being made) with Iran up until June alone standing as a shining example.
Firstly, the chemistry: Venezuela’s main export grades, Merey-16 and Boscan, exceed the SPR’s sulphur limits and are denser than what the caverns can hold. The SPR contains no heavy crude at all, with the Energy Department reporting to Congress in 2016 that the cost of storing heavy oil outweigh the benefits.
Secondly, the “deal”: Delcy Rodríguez-led Venezuela has clearly stated that they’re amenable towards a 25-year bilateral arrangement — not the 100-year concession Washington disclosed — wherein Venezuela’s take would be roughly $19 per barrel and the production target for the 17 fields earmarked would be more than 1.5 million bpd (barrels per day).
Thirdly, the arithmetic: over one-fifth of the “65 billion” number is the extra-heavy bitumen grade of oil found in Venezuela’s Orinoco belt, which has been booked by Venezuelan state-owned oil major PDVSA under what can be considered as generous assumptions. Extra-heavy extraction is capital-intensive and a barrel only counts as proven if it’s economically recoverable at current prices and technology. Current Orinoco projects require over $12 billion of investment to reach peak output of just 660,000 bpd. Even if the 17 fields hit Rodríguez’s 1.5 million bpd target, that target assumes $100 billion of infrastructure that hasn’t been financed and upgraders that take years to build – both integral parts of the Caracas-bound leg of the bilateral arrangement offered. The government doesn’t intend to make no money from crude oil sales during this process: it’s willing to settle for $19 per barrel while retaining total ownership and sovereignty.
In short, unless American oil majors or the US government is willing to cough up around $100 billion in cash and expertise over the course of several years to eventually approach production capability at scale, there won’t be any extra volumes of crude flowing to the Gulf Coast refineries that had been re-engineered to process heavy crudes years ago. The idea of the crude flowing into the SPR was false to begin with and doesn’t bear further consideration.
With America’s all-weather allies in Europe and Asia needing oil and no technological bottlenecks for export, the US consumer can clearly see the impact of the energy crisis at the pump, as indicated by the American Automobile Association’s (AAA) daily releases.
Source: Leverage Shares analysis. AAA data as of September 18, 2026
Diesel cuts differently than petrol (or “gasoline”): this fuel powers the trucks, tractors and vans whose operation goes into the production and transportation of agricultural produce and the logistics of practically every single category of goods consumed by the public. Diesel doesn’t just stay in the tank; it resonates across the economy – and the bill will come due in the months to come.
The Bill the US Wants Everybody Else to PayAs the previous article10 about Treasury yields indicated, a crucial slippage throughout this current administration has been the rapid erosion of the means to bolster markets, address partners and lay to rest thorny issues with effective messaging and parleys – a skillset the US government built up over more than a century of global engagement. What reinforced the perceived effectiveness of the American system was the notion of checks and balances within a sophisticated political and administrative system that limits unilateral power. The latest action enacted by Congress is yet more indication of that not being the case.
On the 16th of September – and just before Congress goes away on recess – both the US Senate and House passed the “Lindsey O. Graham Sanctioning Russia and Iran Act of 2026”, which authorises Trump to impose up to 100% tariffs on the five largest importers of Russian oil and natural gas and impose additional measures on Russia’s energy and defence sectors as well as its fleet of tankers used to circumvent existing sanctions, while slapping more sanctions on Iran. While it doesn’t specify the nations targeted, it is clearly understood that the two major powers in the crosshairs are the world’s largest energy consumers whose utilization of sanctioned energy supplies has arguably been the main reason prices haven’t been higher so far: China and India.
Throughout the crisis created by the conflict in both Europe and the Middle East, the two countries’ sprawling energy industries kept flows going at only moderately elevated price levels for both their respective citizenry as well as other parts of the world by processing Russian crude and, more recently, gas. Indian-refined diesel in particular flowed through most of Europe until earlier this year when Europe decided to tighten the sourcing requirements for the fuels they consume earlier in the year. Since then, Indian-refined diesel exports moved to other parts of the world.
While China has responded with voluble protests, India’s response11 was brief, pointed, and more telling:
“As stated on several earlier occasions, India remains firmly committed to ensuring energy security for its 1.4 billion people. It will continue to do so through diversified sourcing and on the basis of evolving market dynamics. This issue has been discussed at high levels in recent months with various US interlocutors. Its potential implications for not just the bilateral relationship but also the international energy market have been very clearly articulated by the Indian side. The Indian side has also made clear its determination to take all necessary measures to protect its trade and economic interests. Government will work closely with Indian trade and industry bodies to deal with the implications of these developments.”
The tacit refusal to specify further conversation between the nation is the culmination to what Evan Feigenbaum, a George W. Bush-era State Department official and current Vice President at the Carnegie Endowment for International Peace, had described12 almost exactly a year earlier as the start of a slow-motion catastrophe that unravelled 25 years of painstaking trust- and relationship-building between the US and India, which was key given the historic context of substantial suspicions in India over Washington’s geopolitical manoeuvrings. In the present, the terse response reads as a brush-off.
Since the last tariff tantrum, India has gone on to execute numerous trade agreements around the world – principally the EU and the UK. With the US, it hasn’t. This matters to the American consumer: India manufactures high-quality components for the US auto industry, leads in the manufacturing and sales of pharmaceuticals that are sold around the world, is a major player in the manufacturing and assembly of electronic components (substantially more than just Apple’s investments), and much more. Regardless of what Trump says – and as proven by multiple studies executed after his last tariff tantrum – the consumer ultimately pays for the tariffs and not the exporter. During the last round of tariff hikes, Indian export prices remained unchanged. This isn’t likely to change no matter how many zeros are added to or deducted from the tariff rate: the American consumer will be paying and, if the US’ all-weather allies were to follow suit, so will their citizens.
All told: given the voting pattern for the bill and polling results, the upcoming mid-terms are essentially for the Democrats to lose, and not for the Republicans to win. However, it won’t change what is being set in motion: the bills will gather around US allies first and then go on to accumulate in force in the US in the year to come. The Federal Reserve’s just-announced rate hike likely won’t be the only one.
Professional investors might consider instruments based on energy instruments such as the +3x Long Oil & Gas ETP (XLE3), the -3x Short Oil & Gas ETP (XLGS), the +3x Long WTI ETC (WTI3) and the -3x Short WTI ETC (WTOS).
Footnotes:
Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.
Share this:
INVESTOR TYPE:
LOCATION:
Never miss out on important announcements. Get premium content ahead of the crowd. Enjoy exclusive insights via the newsletter only.
