Fears Ease of Closure to Strait of Hormuz
Iran’s threat to close the Strait of Hormuz if sanctions are imposed on the country’s oil exports has been mitigated somewhat by a statement from a Saudi official that other Gulf states will make up the loss if the Iranians…
Iran’s threat to close the Strait of Hormuz if sanctions are imposed on the country’s oil exports has been mitigated somewhat by a statement from a Saudi official that other Gulf states will make up the loss if the Iranians carry through with their threat.
That’s very kind, but not very realistic. About 15.5 million barrels/day pass through the Strait, and even if all the spare capacity in the Middle East could be brought on-line quickly, that doesn’t amount to more than around 3 million barrels.
A new pipeline is scheduled to start transporting 2.5 million barrels/day from Abu Dhabi to the Gulf of Oman. Other idled pipelines in the area could transport another 2 million barrels or so every day, but it would take some time (probably weeks at a minimum) to bring the pipelines back on line.
The Saudi statement did have the effect of curbing a steady rise in crude prices. Brent crude is down about -0.7% at $108.56/barrel and WTI crude is down about -0.8% at $100.53/barrel.
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Paul Ausick has been writing for 247Wallst.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.
He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.
