Strait of Hormuz threatened with closure

Jul 13 2018

Iranian President Rouhani has hinted that Iran could disrupt the flow of crude exports out of the Arabian Gulf, while an Iranian Revolutionary Guard commander explicitly stated; "If they want to stop Iranian oil exports, we will not allow any oil shipment to pass through the Strait of Hormuz."

A disruption of this magnitude would result in a monumental shift for both the global oil and oil transportation markets as 979 mill tonnes of dirty and clean cargo passed through this choke point last year, McQuilling Services said in a blog.


Roughly one third of global crude exports would be removed from the market, sending crude prices well over $100 per barrel into uncharted territory. Worldwide refiners will look to alternative regions for feedstock requirements after severe drawdowns of existing inventories. 


However, it’s unlikely that would offset the negative impacts of a lack of Arabian Gulf flows. This would result in a significant fall in tanker demand as Arabian Gulf tanker exports account for well over 5 trill tonne/miles annually, McQuilling concluded.


Meanwhile, US President Trump has criticised OPEC for the recent rise in fuel prices, claiming that the US pays for defence for many of the groups’ members.


As a result, OPEC should make an effort to increase crude supply to pressure global pricing, he said. 


The closing of the Straits has been threatened many times before, especially during the two Israel/Arab conflicts in the 1960s and 1970s, which resulted in the shutting of the Suez Canal and the Shatt el Arab, plus the Iran/Iraq war in the 1980s when VLCCs/ULCCs ran the gauntlet of missile attacks when shuttling crude from Kharg Island to Hormuz Island - Ed.


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