(Bloomberg) — The world\u2019s top oil traders warned that the ongoing closure of the Strait of Hormuz is increasing the risk of a global recession as fuel demand takes a hit.<\/p>\n
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The vital energy channel has been largely closed to non-Iranian shipping since war began at the end of February, choking off hundreds of millions of barrels of supply. Consumer nations have been using up buffer inventories that they hold for emergencies to cope with the shortfall.<\/p>\n
While international forecasters already acknowledge that conflict is sapping economic growth and oil demand, merchants including Vitol Group, Gunvor Group and Trafigura Group warned on Tuesday that the situation will get even worse if Hormuz doesn\u2019t open up soon.<\/p>\n
\u201cWe\u2019ve borrowed supply,\u201d Vitol Group Chief Executive Officer Russell Hardy said at the FT Commodities Global Summit in Lausanne, pointing to drawdowns of inventories from a variety of sources. \u201cBut you can\u2019t do that forever. There are recessionary consequences from having to ration that demand.\u201d<\/p>\n
Benchmark oil futures rallied about 30% since the war began. They spiked to almost $120 a barrel in early March but have since subsided, trading near $95 on Tuesday amid tentative hopes the US and Iran can reach some kind of peace deal.<\/p>\n
Trickle of Ships<\/p>\n
Hardy said the war so far eliminated about 4 million barrels a day of demand, a figure that will rise if Hormuz stays shut.<\/p>\n
Tracking the electronic signals of tankers suggest that only a few are passing through Hormuz, including some that are linked to Iran but aren\u2019t leaving the region. Some carriers are sneaking through with their transponders off.<\/p>\n
Gunvor\u2019s head of research, Frederic Lasserre, told the FT event that the amount of lost consumption may need to double next month to 5 million barrels a day \u2014 roughly 5% of global supply \u2014 in order to balance markets, and that a three-month closure of the waterway could trigger a worldwide recession.<\/p>\n
Crude oil and refined product supplies from the Persian Gulf have been slashed by roughly 13 million barrels a day since the war started, according to the International Energy Agency. While the agency projects a sharp drop of 1.5 million barrels a day in demand this quarter, it anticipates a recovery in the second half of the year.<\/p>\n
Story Continues <\/p>\n
The consumption hit is so far most concentrated in Asia, but will spread as global prices react, according to Trafigura Group.<\/p>\n
\u201cDemand destruction is happening in places that are not visible pricing centers,\u201d Chief Economist Saad Rahim said at the event. \u201cPeople are underestimating that loss of supply, that then has to be met with some loss of demand somewhere else.\u201d<\/p>\n
Petrochemical producers in China, Japan and South Korea have scaled back operations, reining in output of plastics used in everything from bottles to electrical appliances. Airlines in nations from Vietnam to the Netherlands are canceling flights or drawing up contingency plans to do so. Across Southeast Asia, harvest-ready rice fields are lying idle as fuel and fertilizer costs bite.<\/p>\n
\u201cThat adjustment is already happening, but if this continues it has to get larger and larger,\u201d Rahim said of the need for demand to recalibrate in response to lower supply. \u201cWe\u2019re at a critical inflection point.\u201d<\/p>\n
The US is still in the dark on whether Iran will take part in fresh talks to end the war before a ceasefire expires on Wednesday, with the sides deadlocked on issues including access to Hormuz.<\/p>\n
Should there be a diplomatic resolution, \u201cI think you have just about dodged the bullet,\u201d Rahim said. But if the crisis drags on, \u201cyou just don\u2019t have those molecules, somebody has to go without. So that means a contraction of economic activity.\u201d<\/p>\n
Gunvor\u2019s Lasserre told the conference that the trader is focused on three scenarios, ranging from the continued closure of Hormuz to a partial or full reopening.<\/p>\n
\u201cIf you don\u2019t get any reopening in three months\u2019 time, then the case becomes a macro issue where the world is about to fall into recession,\u201d he said. \u201cAnd then you have massive demand adjustment.\u201d<\/p>\n
–With assistance from Yongchang Chin.<\/p>\n
(Updates with Vitol CEO quote in fourth paragraph.)<\/p>\n
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\u00a92026 Bloomberg L.P.<\/p>\n","protected":false},"excerpt":{"rendered":"(Bloomberg) — The world\u2019s top oil traders warned that the ongoing closure of the Strait of Hormuz is…\n","protected":false},"author":2,"featured_media":76782,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[28],"tags":[1824,28002,28001,25046,28000,102,34,27998,101,27999,27997],"class_list":{"0":"post-76781","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-strait-of-hormuz","8":"tag-bloomberg","9":"tag-chief-economist-saad-rahim","10":"tag-frederic-lasserre","11":"tag-global-recession","12":"tag-gunvor-group","13":"tag-hormuz","14":"tag-iran","15":"tag-russell-hardy","16":"tag-strait-of-hormuz","17":"tag-trafigura-group","18":"tag-vitol-group"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@iran\/116444104149754479","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/posts\/76781","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/comments?post=76781"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/posts\/76781\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/media\/76782"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/media?parent=76781"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/categories?post=76781"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/tags?post=76781"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}