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Commerzbank analysts highlight extreme swings in Brent and WTI as the Strait of Hormuz remains effectively closed, forcing key Middle Eastern producers to cut output by an estimated 6.7 million bpd. G7 governments have asked the IEA to prepare emergency stockpile scenarios, while comments from US officials and President Trump have amplified Oil price volatility.
Hormuz closure drives supply shock risk
“Brent crude oil prices whipsawed between USD81-95 range, a wide 15% swing yesterday. Oil prices fell after Energy Secretary Chris Wright erroneously posted, and then deleted, a message that the US Navy had escorted an oil tanker through the Strait of Hormuz.”
“There were also a flurry of messages from President Trump on social media which added to oil market volatility. He said the US had “no reports” of mines being placed but later urged Iran to remove any explosives they may have laid.”
“The Strait of Hormuz remains effectively closed to shipping activity. Saudi Arabia, Iraq, the UAE, and Kuwait have cut oil production due to limited storage capacity. Collectively, there are estimates that this amounts to a total cut of 6.7 million barrels per day (bpd) or around 6% of total global oil supply.”
“Amin Nasser, the CEO of a major Saudi Arabia oil company, said “While we have faced disruptions in the past, this one by far is the biggest crisis the region’s oil and gas industry has faced”. He added that “The disruption has caused a severe chain reaction in not only shipping and insurance but there’s also a drastic domino effect on aviation, agriculture, automotive and other industries. There would be catastrophic consequences for the world’s oil markets the longer the disruption goes on, and the more drastic the consequences for the global economy.””
“The G7 nations asked the International Energy Agency (IEA) to prepare scenarios for the release of emergency oil stockpiles. The IEA oversees the use of the OECD oil reserves. IEA Executive Director Fatih Birol said in a statement that IEA member governments will “assess the current security of supply and market conditions to inform a subsequent decision on whether to make emergency stocks of IEA countries available.””
