Persian Gulf shipping crisis explodes: Missiles hit tanker and dozens of vessels remain trapped. Supertankers flee the Persian Gulf

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Strait of Hormuz Oil Bottleneck, Crude Jumps, Tanker Costs Soar 900 Percent

Trump says prices will come back down. OK when?

Oil Bottleneck Threatens the Global Economy

The Wall Street Journal reports Strait of Hormuz: The Oil Bottleneck Threatening the Global Economy

As of Wednesday, day five of the war on Iran, several thousand ships were stuck inside and outside the Persian Gulf, trapping roughly a fifth of the oil and liquefied natural gas the world consumes each day. The blockage is cascading through the region’s industry as storage tanks fill up with oil that can’t set sail, forcing producers to slash output.

The problem is most acute in Iraq, the world’s fifth-biggest producer. Output has more than halved, oil officials in the country said, with cutbacks at the southern Rumaila and West Qurna 2 fields.

The cost of chartering tankers to transport oil from the Persian Gulf has rocketed and now equates to 20% of the price of a crude cargo, compared with 3% in normal times, according to Argus Media analysts.

Cutbacks prompted by dwindling storage compound disruptions from Iranian attacks on regional energy infrastructure, which prompted Qatar’s national producer to stop making liquefied natural gas.

In another sign of U.S. concern, the Navy sent a message to tankers Wednesday morning saying they could ask for assistance if they wanted to sail through the Strait, said shipping executives with tankers stuck in the Gulf.

Traders questioned whether the U.S. would be willing to put expensive naval ships in harm’s way. They are currently positioned outside the Gulf, distanced from Iranian missiles. Even if U.S. ships conducted escorts, the market wouldn’t return to normal, possibly functioning in daylight hours only.

“Practically, it is very difficult for any navy to escort ships through that narrow strait,” said Ellis Morley, specialist in cargo and commodities at Howden, an insurance broker. “That horseshoe shape of the Strait keeps ships in the most dangerous area for a long time.”

Saudi Arabia has abundant storage capacity, as does the U.A.E. Elsewhere, however, tanks are filling up.

By Tuesday, Iraq had enough space to store the volume of oil it typically exports through the Strait every three days, according to JPMorgan Chase analyst Natasha Kaneva. Unless the Strait opens, 3.3 million barrels of daily production in the region could be lost by early next week, she calculates—roughly enough to supply Japan.

“If Hormuz remains effectively closed, supply losses would accelerate,” Kaneva said.

22 Percent of Global Supply Is Offline