There are few signs of a breakthrough in ending the war, and oil prices have fallen even though traffic through the Strait of Hormuz remains severely restricted.
Brent crude, the world oil benchmark, fell about 2% to $87.20 a barrel. The U.S. benchmark WTI fell as well, to $81.45 per barrel.
The decline follows a broader decline in commodity prices and comes even as Iran and the United States appear to be hardening their positions in asserting control of Hormuz. Traffic on the waterway is still well below the pre-war 130-140 trips per day, but flows may be higher than official figures indicate.
“Unofficial numbers suggest that traffic could increase further, given ship-to-ship movement and the darkening of ships as they transit the straits,” Mohit Kumar, chief economist at investment bank Jefferies, said in a note Thursday.
He noted that several other factors are helping to cushion the blow from the historic oil supply shock. China is cutting back on oil imports and other countries are relying on stockpiles, while the United States is ramping up oil production and Gulf producers are finding alternative export routes through pipelines. “Despite the strait closure, the demand-supply situation does not seem too bad,” Kumar said.
Still, risks remain skewed to the upside. The International Energy Agency warned yesterday that the world faces a shortfall of 1.8 million barrels a day this quarter, more than double what it predicted a month ago, as global oil stocks fall rapidly.
“The market cannot continue to reduce inventories forever; sooner or later the cupboards will be empty,” Dan Pickering, chief investment officer at Pickering Energy Partners, said in a note. “If the battle for the Strait of Hormuz continues, it will be a difficult fall.”
