The Strait of Hormuz Risks To Oil Prices

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    Transportation of oil and gas from the Middle…



    [b]Iran is in full control of the Persian Gulf and the Strait of Hormuz top Iranian Navy commander says
    “The naval forces of the Army are prepared to defend the waters with their intelligence dominance and monitoring of the enemy’s physical presence,” Gen. Alireza Tangsiri, chief of the Islamic Revolutionary Guard Corps, said Monday.

    “We have a message to our Muslim neighbors: We have repeatedly stated that we are extending our hand of brotherhood to you and believe that the Persian Gulf is our home for which we can provide security. There is no need for foreigners such as the United States and the countries whose home is not here.”

    Source: Reuters


    The Iranian currency continues to sink as the November deadline nears for Europe to choose between cutting ties to Iran or losing U.S. markets. The Tehran regime has threatened to close the Strait of Hormuz if its oil is denied access to world markets, it faces further economic strangulation if it does not submit to U.S. demands.


    Iran’s air force carrying out a drill near Strait of Hormuz

    Iran’s official IRNA news agency said Friday.

    The drill involves the military’s and Revolutionary Guard fighter jets, including U.S.-made F-4, French Mirage and Russian Sukhoi-22 planes, the report said, adding that five logistics and combat helicopters are also taking part in the exercise over the Persian Gulf waters and the Sea of Oman.

    IRNA said the maneuver is a warning to Iran’s enemies that they face a quick, “stern response” in case of any ill-will toward Iran.

    The exercise is part of annual manifestations on the anniversary of the start of the eight-year war Iraqi dictator Saddam Hussein launched against Iran in 1980.

    Helmholtz Watson

    [b][color=red][b]U.S. FAA prohibits operators from flying over Strait of Hormuz and Gulf of Oman
    due to heightened tensions[/b][/color][/b]

    U.S. Federal Aviation Administration issued an emergency order prohibiting U.S. operators from flying in an overwater area of Tehran-controlled airspace over the Strait of Hormuz and Gulf of Oman

    said it remained concerned about the escalation of tension and military activity within close proximity to high volume civil aircraft routes as well as Iran’s willingness to use long-range missiles in international airspace with little or no warning.

    via Reuters


    The Gulf of Oman, where oil vessels were attacked on May 12 and June 13, is used as a transportation route by all seven major exporters in the region: Saudi Arabia, Iran, Iraq, Kuwait, Qatar, UAE and Oman.

    These producers collectively pump just over 24 million barrels a day of crude, a little less than a quarter of world consumption.

    Nearly half goes to Asia, where apart from China, India, Japan and South Korea, significant net oil importers include Taiwan, Indonesia, Vietnam, Thailand, Philippines, Australia and Pakistan.

    Overall, Asia holds surplus refining capacity but lacks enough local crude feedstock. It is also the world’s fastest-growing region for fuel demand.


    Iran has never actually stopped traffic through the strait, despite frequent threats to do so. The recent tanker attacks in the Gulf of Oman were likely caused by limpet mines and projectiles, aimed at damaging the ships but not sinking them, according to preliminary investigations.


    Exports of oil and liquefied natural gas out of the Middle East have continued as per normal.


    Insurance premiums for ships sailing around the Strait of Hormuz have shot up by an average of 10%, and by up to 100% for some large tankers, while some shippers temporarily stopped plying the route as a precaution.

    The leaders should decide if they can help provide security to commercial shipments in and around the Strait of Hormuz with naval escorts and inform Washington.

    Japan, South Korea, Australia and New Zealand are the only Asian countries that maintain a minimum 90 days’ worth of net oil imports as emergency stockpiles, based on the International Energy Agency’s recommended guidelines. China has been building strategic oil reserves in recent years, but those are said to be equivalent to only about 32 days of net oil imports.

    The emergency stockpiles will be used domestically, leaving those without reserves in the lurch. Oil producers in the region such as Indonesia, Malaysia, Australia and Vietnam already pump the most they can. Asian buyers could turn to the North Sea, West Africa, North America and Latin America for additional supplies but those don’t have much spare capacity, at least nothing that can be brought on stream quickly.

    In the longer term, Asian governments might want to send a clear message to the Trump administration: If their vital interests are directly impacted by Washington’s actions against Iran, they need to have a say in those decisions instead of simply being left to mop up the mess afterward.


    [size=5][b]LNG prices could double if Strait of Hormuz closed: Platts Analytics
    Dubai — Spot liquefied natural gas prices could double if the Strait of Hormuz is disrupted, effectively placing all of Qatar’s export capacity under force majeure, S&P Global Platts Analytics said in its latest Global LNG Monthly Forecast.

    While Platts Analytics did not expect the waterway to be closed, if it were to occur it could potentially wipe out about 280 million cu m/d of Qatari volume, or 22% of global demand, it said in the report.
    Unlike Saudi Arabia and Abu Dhabi, Qatar does not have export routes that can be used as an alternative that bypass the Strait of Hormuz, Platts Analytics said.

    “This massive exogenous supply shock easily holds the potential to double spot LNG prices in short order,” Platts Analytics said, adding there was not enough spare shipping capacity to offset the loss.

    “Demand destruction from a price shock would make up the difference and lead to a market equilibrium at a notably higher price point. From a longer term perspective, the event would prove problematic for Qatari efforts at renewing expiring contracts.”

    If all other producers ramped up production capacity to 100%, global markets could add about 220 million cu m/d of production, Platts Analytics estimated. Those with most capacity to boost output are Russia, Australia, Malaysia and the US, it said.

    Likewise, the buyers most likely to react were in Europe, where there is a large element of coal-to-gas switching and ample storage, according to Platts Analytics. European LNG imports would likely decline by at least 90 million cu m/d from expected Q3 LNG demand.

    Such a disruption would also likely discourage some buyers that want secure supply, according to the report. The potential for those buyers to look elsewhere was important because about 13 Bcm/year in Qatari offtake agreements, or roughly 12% of production, is set to expire before December 2022, Platts Analytics said.


    [size=5][i]I was lucky enough to I would urge all to be on full tank of gas — as[color=red”> “Big OIL” will certainly add a DIME or two to price per gallon in coming days … even though Memorial Day spike pattern is declining as it traditionally does [/i][/size]


    U.S., France to discuss Strait of Hormuz navy coordination

    Defence Secretary Mark Esper and his French counterpart will discuss on Saturday how France’s navy could coordinate with Washington to ensure freedom of navigation in the Strait of Hormuz, a senior U.S. defence official said on Friday.

    “We recognise that France has an interest in participating in freedom of navigation, bringing freedom of navigation capabilities to the Gulf and we will be looking to find ways to harness and use that interest to better coordinate with our own initiative,” the official told reporters in a conference call ahead of Esper’s meeting with Florence Parly in Paris.

    France has ruled out joining a U.S.-led coalition of countries protecting oil tankers and cargo ships from threats posed by Iran in the Strait of Hormuz, but has pushed for a European alternative.

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