Oil: Prices stay subdued despite Hormuz risk – Rabobank

Rabobank’s Senior Market Strategist Benjamin Picton stresses that Oil markets remain in focus as Brent futures fell sharply even with the Strait of Hormuz effectively closed in their baseline. Picton cites ongoing US–Iran stalemate, constrained IAEA access, and significant demand destruction plus strategic reserve releases that roughly offset lost Hormuz supply, warning that low stocks will eventually translate into tighter conditions in developed markets.

Hormuz closure offset by demand loss

"Oil markets continue to be a point of focus. Front-month Brent futures closed 2.84% lower yesterday as markets remain of a Pollyanna state of mind over the status of the Strait of Hormuz."

"RaboResearch updated our Iran war baseline forecast two weeks ago to say that we didn’t think a meaningful deal would stick in the short term, and that the Strait of Hormuz would consequently remain functionally closed until September at least."

"Needless to say, while the US-Iran stalemate continues global oil and oil products stocks continue to run down towards dangerously low levels."

"Vitol board member Tom Baker recently said that the oil trader estimated global demand destruction at about 4 million barrels a day, mostly from emerging Asia and Africa."

"Nevertheless, this remains a stocks to flows problem, and the cracks cannot be papered over indefinitely without supply tightness also being felt materially in developed markets."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)