Strait of Hormuz Diversions Hinder Oil Cargoes from Reaching Markets
As shipping companies avoid the closure of the Strait of Hormuz following U.S. and Israeli military strikes on Iran, this has in turn curtailed refined product flows from the Persian Gulf region/Gulf of Oman from reaching export markets, according to market sources.
The Strait of Hormuz is a narrow waterway between Iran, the United Arab Emirates (UAE) and Oman connecting the Persian Gulf to the Gulf of Oman and the open ocean. The U.S. and Israel began military strikes on Iran on Feb. 28. Iranian forces retaliated with attacks on Israeli and U.S. military bases in the neighboring states of Qatar, UAE, Bahrain, Kuwait, Israel and Jordan.
Rystad Energy analysts have estimated around 500,000 barrels/day of gasoline, 1 million b/d of diesel/gasoil, 1.7 million b/d of naphtha and 1 million b/d of liquefied petroleum gas (LPG) will subsequently be cut off from markets.
“Around 15 million b/d of crude oil exports [will be] unable to reach markets,” said analysts at Rystad Energy on Monday. “Alternative transportation mechanisms can be used to for 4-5 million b/d to bypass the Strait of Hormuz… [but] there may be some operational challenges to the full upside being realized.”
“The Strait of Hormuz is expected to be closed or restricted for the next one to two weeks, with lingering impacts through the end of March,” Rystad added.
Meanwhile, analysts at ship tracking data company Kpler said in a note on Monday around 25-30% of Europe’s supply of jet fuel transits the Strait of Hormuz. Some 85% of LPG supply passes through the waterway and Qatar accounts for around 20% of global supply that also transits through the Strait.
Still, the Strait is not formally closed. Limited traffic continues to transit the waterway, primarily Iranian and Chinese-flagged ships, but commercial operators, major oil companies, and insurers have effectively withdrawn from the corridor, according to a report by shipping analytics provider Kpler. Insurance premiums had already reached six-year highs ahead of the strikes, it said.
Shipping companies Maersk, Hapag-Lloyd, Mediterranean Shipping Company (MSC) and CMA CGM have suspended all vessels from transiting through Strait of Hormuz and the Middle East Gulf region until further notice amid the escalating conflict between the U.S., Iran and Israel, according to the companies in advisories to customers on Sunday.
“Passage through the Suez Canal has been suspended until further notice and vessels will be rerouted via the Cape of Good Hope,” said French shipping company CMA CGM.
Reporting by Stacy Maphula, smaphula@opisnet.com; Editing by Rob Sheridan, rsheridan@opisnet.com