In The Next 10 Days, The Last Prewar Ships To Leave The Persian Gulf Will Dock And Offload - Then Things Get Interesting

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Energy shipments stopped in their tracks on Feb. 28 when the war began and Iran effectively closed the Strait of Hormuz. But plenty of ships made it out to sea in those final days before the conflict began. The last of them should arrive in Japanese and Korean ports sometime over the next 8-10 days. After that, there's nothing coming. "You have this massive air pocket. At this stage, we're looking at probably somewhere around a half a billion barrels of what would normally be flowing out of Hormuz that has now not been flowing," said Rory Johnston, founder of Commodity Context. In the oil industry, there's a difference between what people call paper oil and physical oil.

Right now, there's a shortage in paper oil, which are contracts. It represents oil that can be shipped, as opposed to being an actual barrel travelling on a ship. But as soon as the actual, final shipments of oil out of the strait arrive at their destinations, the shortage moves from the paper world into the physical world. When that happens, there will be a lack of tangible oil to actually power things. Governments around the world have agreed to release 400 million barrels of oil from strategic reserves. The United States has waived some sanctions on refiners in Iran and Russia to help deal with the supply shock. Japan's vice minister for international affairs, Takehiko Matsuo, has said that's still not nearly enough to fix supply issues.He told Reuters that Japan has roughly three weeks of gas in storage.

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Meanwhile, oil industry executives and policymakers are meeting in Houston for the annual CERAWeek conference, often described as the energy sector's version of Davos. Oil analysts like Karim Fawaz, director of energy advisory at S&P Global, have reported on what they describe as "irrational optimism" among people in the industry right now.

"The alternative is so daunting to think about, with consequences so grave, that many are choosing optimism even without a solid foundation," he posted to X on Wednesday. Johnston is hearing the same thing. "You're seeing a lot of comments from the executives basically being like, this is basically cataclysmic. But, it's so bad that it's not going to last, right?" he said.

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https://www.cbc.ca/news/business/armstrong-oil-strait-of-hormuz-9.7142143