The recent memorandum of understanding between Iran and the United States has led to the reopening of the Strait of Hormuz. However, this may be too late to prevent a significant oil supply crisis. According to analytics firm Kpler, the world has lost 1.15 billion barrels of oil supply during the war.
Oil Market 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 also hit operational stress levels. President Donald Trump warned that the US could run out of reserves in about four weeks.
Reopening the Strait of Hormuz may not 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 its slow journey to its destination. This process could take months before the flow of oil returns to normal.
Industry analysts believe that 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. The math checks out: even if the global oil market started producing nearly 5 million more barrels of supply than customers demanded, it would take around a year to get back 1.15 billion barrels of lost supply.
Original reporting: KTVZ (Central Oregon) — read the source article.
