Hormuz Flows Remain Disrupted as Oil Market Teeters on Credit Card Limits

The global oil market is facing a precarious situation as disruptions to flows through the Strait of Hormuz persist, and analysts warn that stock draws are no longer sufficient to offset losses. According to Saul Kavonic, Senior Research Analyst at MST Marquee, 'We're living on an oil market credit card, we can't draw stocks forever.'

Oil flows out of the Strait of Hormuz have declined to about one third of pre-war levels, with only 5-7 million barrels per day (bpd) making it out of the Persian Gulf every day. Ship-to-ship transfers outside the Strait are supporting these flows, but Kavonic notes that there is still potential for further reduction in volumes coming from the region.

The analyst also points to the depletion of strategic inventories in developed economies, including the United States' Strategic Petroleum Reserve (SPR), which now holds its lowest level of crude oil since the early 1980s. China's recent decision to slash its crude oil imports by about 4-5 million bpd has further exacerbated the situation.

Kavonic cautions that while there is currently a buffer in place, 'there is potentially room for things to get tighter and worse before they get better.'