Why Iran Chaos Not Soaring Oil to $100: 160-Million-Barrel Worry

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Oil expert Morgan Downey explains why markets fear an Iranian oil dump—not a supply shock

By S JHA

Mumbai, January 13, 2026 — With Iran gripped by political turmoil and sitting astride the Strait of Hormuz, conventional wisdom says oil prices should be screaming higher. Regime change, after all, usually means supply risk. Yet WTI is hovering near $59—and the market is unmoved.

According to oil expert Morgan Downey, the reason is counterintuitive but compelling. “The market isn’t scared of a shortage,” Downey explains. “It is terrified of an inventory dump,” he adds in a post on X.

Iran, he notes, is sitting on a 160-million-barrel oil market grenade—and it’s floating offshore. Here’s the bind. Iran runs on natural gas, much of it from the massive South Pars field. “But South Pars is a wet gas reservoir: you cannot produce gas without also producing condensate, an ultra-light crude (API 53°) often described as raw gasoline,” writes Downey.

Condensate is valuable when sold fresh. “Stored too long in tropical heat, however, it oxidises, turns gummy, and becomes refinery poison. With sanctions tightening and Russia flooding China with discounted oil, Iran can’t sell this byproduct,” he adds.

But it also can’t stop pumping gas without blacking out Tehran. “So Iran did the only thing left: it put the oil on ships. Today, roughly 160 million barrels—about 75% of the world’s floating storage—are drifting offshore, much of it near Malaysia and the South China Sea,” he adds.

Nearly 40% is condensate, degrading by the day. “These tankers aren’t strategic reserves; they are costly overflow tanks, burning $50,000 a day each,’ Downey notes.

The market understands the risk. If the regime falls—or sanctions ease—this oil doesn’t vanish. “It floods the spot market,” he states, adding: “That is why traders aren’t bidding oil higher. They’re bracing for a dump.”