Strait or Hormuz seeing less than a handful of tankers pass per day, says Kpler's Matt Smith
Summary
- The Strait of Hormuz is virtually closed to shipping traffic due to drone and missile threats, with less than a handful of tankers passing daily.
- Middle Eastern oil producers are being forced to curtail production because regional storage is full and loaded tankers cannot leave the Gulf.
- Even if the geopolitical situation is resolved immediately, clearing the tanker backlog and restoring production will take at least a month and a half.
- The US has released 400 million barrels from the SPR to offset the shock, while countries like the UAE and Saudi Arabia are rerouting crude via pipelines to maintain exports.
Trade Ideas
"There's just all these tankers that are stuck in there that simply can't get out. Most of them are loaded because all of the empty tankers are getting used to be filled up." When a massive portion of the global tanker fleet is trapped in the Gulf or used as floating storage, the global supply of available vessels plummets. This artificial scarcity drives up day charter rates for crude and product tankers operating outside the conflict zone. LONG tanker operators as constrained vessel supply leads to surging charter rates and expanded profit margins. A swift military clearing of the Strait releases the trapped fleet, crashing day rates back to normal levels.
"You're having these producers in the region that are having to shut down production, right, curtail this oil production." Middle Eastern producers are losing volume and market share because their export routes are blocked. Western and US-based producers will benefit from the resulting higher global oil prices without suffering the volume disruptions, leading to massive margin expansion. LONG US supermajors and domestic producers who can sell unhindered production into a supply-constrained, high-price global market. US regulatory changes, windfall taxes, or a faster-than-expected clearing of the Strait that floods the market with Middle Eastern supply.
"Even if you do open up the Strait of Hormuz again, there's such a backup of tankers, it's going to take maybe a month for it to get back to normal anyway." The physical inability to move barrels out of the Middle East Gulf creates a severe, structural global supply deficit. Even with massive SPR releases acting as a band-aid, the prolonged backlog ensures that global oil markets will remain undersupplied for months, forcing prices higher. LONG USO as global oil prices must price in a prolonged supply disruption and a sustained geopolitical risk premium. A sudden diplomatic resolution combined with massive coordinated SPR releases globally could cap upside price action.
