A new report suggests increased output, exports still can’t compensate for Hormuz losses: File Image/Pixabay
Volatility in oil trading not seen in three years took place on Thursday, when Brent briefly surged past $126 per barrel – the highest since March 2022 – driven by fears associated with the U.S. blocking of Iranian ports in exchange for the Islamic republic blocking the Strait of Hormuz.
U.S. president Donald Trump’s refusal to give up what may be a more damaging strategy than Iran’s blocking of the strait also caused West Texas Intermediate to reach $110; however, both benchmarks eventually retreated, with Brent descending to just over $114 per barrel and WTI to $104.
Both benchmarks were on track for their fourth month of gains.
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Prospects for any near-term resolution to the Iran conflict…remain dim
Tony Sycamore, market analyst, IG
Washington earlier rejected Iran’s proposal to reopen the strait with strict conditions (including an agreement to end the war), which U.S. Secretary of State Marco Rubio said conflicted with the global understanding of how such international waterways should operate.
He remarked, “What they mean by opening the straits is, yes, the straits are open, as long as you coordinate with Iran, get our permission, or we’ll blow you up and you pay us.”
ING Bank strategists Warren Patterson and Ewa Manthey wrote in a research note, “The breakdown of talks between the U.S. and Iran, along with President Trump reportedly rejecting Iran’s proposal for a reopening of the Strait of Hormuz, has the market losing hope for any quick resumption in oil flows.”
IG market analyst Tony Sycamore agreed and stated in a note, “Prospects for any near-term resolution to the Iran conflict or a reopening of the Strait of Hormuz remain dim.”
ING also predicted an undesirable element that would alleviate the current tight supply situation, in the form of about 1.6 million barrels per day (bpd) of demand lost as consumers, stung by high prices, refrain from buying oil products; however, “it’s clearly not enough to fill the supply gap we are currently facing.”
According to a new report by Vortexa, the Hormuz blockade has removed roughly 9 million bpd of crude from the global market, and while U.S. Gulf Coast crude oil exports have reached record highs and Atlantic Basin to Asia flows are now running about 7 million bpd, it’s not enough to keep pace with the shortfall.
Ship & Bunker News Team
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