The Oil Market

Oil market roller coaster after statements about Hormuz

The oil price moved sharply up and down on Tuesday evening after a series of statements and information about the situation in the important Strait of Hormuz.

First, US Energy Secretary Chris Wright claimed that the country's navy had escorted an oil tanker through the strait. But the statement was denied and the post has been removed.

Shortly afterwards, US intelligence reported that there are signs that Iran is taking steps to mine the Strait of Hormuz.

di Aramco is working hard to send its oil from the port city of Yanbu on the Red Sea coast, to avoid the blocked Strait of Hormuz. This is what CEO Amin Nasser said during a conference call in connection with the release of the report, according to the Financial Times.

In this way, the world's largest oil company hopes to be able to deliver about 70 percent of its normal capacity – five million barrels a day compared to seven in normal cases. Although Saudi Arabia has coastlines on both sides, the lion's share of deliveries goes through Hormuz.

In the conversation, Amin Nasser also warns that a prolonged war could have "catastrophic consequences" for the oil market and the global economy.

- This is by far the biggest crisis that the region's oil and gas industry has faced, he says, according to AFP.
 

Trader: "We've been through crises – it was nothing compared to yesterday"

Trader Manny Newman at Onyx Commodities in London experienced one of the largest price movements in history in Brent oil on Monday, the Financial Times and Wall Street Journal write. First, the price rose to $119 per barrel, then fell to $84 over the course of 23 hours.

– I’ve been through a lot of crises, including Covid, Russia and the Saudi oil attacks in 2019. They were nothing compared to yesterday, she says.

The company had sleeping bags ready and, according to the FT, was living on creatine powder, nicotine patches and “power naps”. The pace felt like playing a video game “for 24 hours straight”, says Newman.

The difference between the buy and sell prices, the so-called spread, was upwards of ten dollars. Usually it is a few cents.

– A mistake could normally cost $10,000, but yesterday it was about $2 million, says the company’s CEO and founder Greg Newman.

Oil market roller coaster after statements about Hormuz

Oil prices moved sharply up and down on Tuesday evening after a series of statements and information about the situation in the important Strait of Hormuz.

First, US Energy Secretary Chris Wright claimed that the country's navy had escorted an oil tanker through the strait. But the claim was denied and the post has been removed.

Shortly afterwards, US intelligence said it saw signs that Iran was taking steps to mine the Strait of Hormuz.

Experts: G7’s emergency oil stockpile is like a drop in the ocean

The oil price rally is slowing and stock market falls are slowing as the G7 countries mention the possibility of opening and using the joint strategic oil reserves. But even though tens of millions of barrels of oil sound like a lot, it is “a drop in the ocean,” writes CNNBusiness.

“It’s not zero, but the effect will likely be quite small,” says Daniel Raimi of the energy think tank Resources for the Future.

The US and the world consume so much oil that reserves cannot even come close to covering the loss that a closed Strait of Hormuz would cause. After Russia’s invasion of Ukraine, the G7 countries released 240 million barrels, which ultimately had only a marginal impact on the price.

Experts say that the only thing that can have a real and long-term effect on oil prices is a free flow through the Strait of Hormuz. Twenty percent of the world’s oil flows through the narrow passage.