Hormuz Risk Premium Melted as Oil Prices Slide
Crude oil prices have been declining due to reduced risk premium associated with potential disruptions in Hormuz Strait trade. Oil prices fell by 5% following reports of an Oman-Iran shipping corridor and a shift in US policy from sanctions to military pressure. Despite the announcements, only seven ships passed through the strait on Thursday, a relatively low number compared to previous days.
OPEC+ recently announced six output increases, but Hormuz Strait blockades continue to hinder exports, leaving much of the new production stuck on paper. The prices of WTI and Brent are currently below their respective resistance levels, with WTI at $84.61 and Brent testing $90.12 support.
The 10-day average for ships passing through Hormuz Strait is around 15 vessels per day, which is lower than the pre-war levels but higher than the March low. Goldman Sachs estimates total Gulf exports to be between 15 million to 16 million barrels per day, still 7-8 million below pre-war levels.