Not Much Has Changed in Hormuz Strait, McNally Says

Summary

Bob McNally argues that the Strait of Hormuz remains effectively closed despite market optimism, leading to prolonged oil and gas supply disruptions. He predicts shortages in diesel and jet fuel will spread from Asia to Europe and the US, with prices likely to rise. China is relatively insulated due to large stockpiles, but other regions will face demand destruction and rationing.

• McNally believes current oil price optimism is unwarranted without a near-term deal.
• Strait of Hormuz closure is the world's largest oil disruption, with recovery taking 3-4 months.
• Natural gas supply recovery could take months to years for LNG trains.
• Diesel and jet fuel shortages are imminent, starting in Asia and moving westward.
• China has large crude stockpiles and is less affected than other Asian countries.
• European refining margins are negative, leading to reduced runs and product price spikes.
• The disruption will cause demand destruction and rationing in affected regions.
• A lasting security premium on oil is expected due to Iran's actions.