Oil Rebounds Amid Ongoing Hormuz Disruption Concerns
Oil prices have rebounded for a second straight session as concerns about supply disruptions in the Strait of Hormuz remain high.
A draft plan from Iran to regulate traffic through the strait has been met with skepticism, with traders questioning whether a durable agreement is close. The proposal would ban U.S. and Israeli vessels from the strait, bar ships from nations that have 'harmed' Iran until compensation is paid, and slap violators with fines up to 20% of cargo value.
The practical hurdles in implementing this plan mean that even if a political understanding is reached, a rapid return to pre-war shipping volumes is far from guaranteed. The Strait of Hormuz normally handles about one-fifth of global oil and liquefied natural gas flows, with Gulf countries' oil-related exports remaining roughly 40% below pre-war levels.
While geopolitical risk is driving the rebound, several factors are capping the upside. U.S. commercial crude inventories rose by 2.5 million barrels to 407 million barrels in the week ended July 31, confounding analyst expectations for a 1.5 million-barrel draw.