The Strait of Hormuz is open again after Iran and the United States signed a memorandum of understanding. However, the oil market is still reeling from the loss of 1.15 billion barrels of oil supply during the war.

Oil Market in Crisis

The International Energy Administration’s strategic petroleum reserves are at their lowest levels since 1990, and the American emergency reserve is at a 43-year low. Commercial inventories have hit operational stress levels, and oil prices may have to go higher again.

President Donald Trump warned of a looming ‘economic catastrophe’ had the strait not reopened. The oil industry believes it could take months for the flow of oil to return to normal.

Reopening the Strait

Reopening the strait won’t immediately solve the world’s inventory problem. The strait will need to be de-mined, empty tankers will need to start coming back into the area, production will need to restart, and oil will need to start the slow journey to its destination.

Industry analysts believe oil prices have moved too low and the market is underpricing the risk of effectively running out of oil before the tanks can be replenished.

Original reporting: KEYT (Ventura/Santa Barbara) — read the source article.