The Deferral Device: Six Paths on Whether Aramco Declares Force Majeure

This tree revises the SITREP's standing 50-60% band for an Aramco force majeure inside 30 days, and the revision sharpens rather than reverses it. That band conflates two events with very different odds: a private contractual notice, which most clauses require promptly in writing to preserve the defence and which goes to a counterparty rather than to a wire, and a public declaration, which is a market event. Split them and the numbers separate. Force majeure becoming public by any route, meaning Narrow Declaration, Customer Discloses or Unbounded Declaration, revises to 45%. Aramco itself standing up and declaring, meaning Narrow Declaration or Unbounded Declaration, revises to 33%. The original band reads high because it prices the second event on the logic of the first. The trim is earned on precedent: this crisis has produced three force majeure declarations, Kuwait Petroleum Corp around Mar. 7, QatarEnergy around Mar. 8-9 and BAPCO Energies on Mar. 9, and neither Aramco nor ADNOC is on that list. Aramco held through Ras Tanura and Ju'aymah being shut since Feb. 28, through Gulf-coast exports at effectively zero, and through 2.0-2.5M bpd of offshore shut-ins at Safaniya, Marjan, Zuluf and Abu Safa, and never declared. That base rate is only weakly informative, because Aramco kept performing through Petroline and this desk has no record of a term buyer missing a cargo; what is new this week is the first documented term failure of the war. Precedent therefore argues for a trim of ten to twenty points, not a reversal. Two paths carry the declaration mass, and almost all of it sits in the back half of the window, because Aramco's own conduct weakens its case until the Yanbu tank farm is demonstrably dry around Sep. 19-21, and because the deferral device has a mathematical limit: it deferred late September into November and cannot defer November into November. On the other standing bands, stated explicitly, the 45-55% second-strike band is an input to this tree rather than a parallel forecast, and the Unbounded Declaration is largely drawn from it. The tree as a whole is additive to that band, because every other path is compatible with a second strike landing somewhere that does not change the repair arithmetic. The 25-35% Saudi-strike-inside-Iraq band is neither subset nor cleanly additive but correlated through one shared trigger, since a second Iraqi-origin strike takes that band above 60%; this tree implies such a strike near 25-30%, which puts Saudi retaliation inside Iraq at 15-18% before residual paths, the lower half of the published band. The desk flags that tension rather than hiding it, and leaves the band alone on the reading that Riyadh's restraint toward Baghdad is reversible without a fresh trigger. One macro constraint caps the upside across the middle paths: a Fed hiking 25bp into a supply shock is a central bank choosing demand destruction as the clearing mechanism, which against a tape that has sold the second day and sold to US inventory data all month is why those paths start near spot. The distribution is right-skewed with a mode below the mean.