US Navy Escort Fails to Boost Oil Prices as Dollar Strength and Supply Concerns Weigh
A record convoy of 40 oil tankers passed through the Strait of Hormuz under US Navy escort on Thursday, but Brent crude prices fell for the third straight day. The market appears to be anchoring on the presence of guided-missile destroyers rather than the actual volume of oil being transported. While CENTCOM reported a record throughput of 18 million barrels, independent trackers Vortexa and Kepler counted only four and twelve transits respectively.
The discrepancy in numbers raises questions about the supply restoration and whether it's sufficient to justify current prices. However, underwriters are pricing the escort as a reduction in tail risk, with war-risk insurance premiums falling from 10% to 4-6% of hull value.
The Federal Reserve also raised its benchmark rate by 25 basis points on Thursday, adding dollar pressure on crude prices. Saudi Arabia's partial return of its East-West pipeline and the restart of the Sohar offshore transfer system further improved the supply picture. The EIA weekly data showed a modest draw in US crude inventories.