Hormuz Strait Progress Likely to Reverse Without Breakthrough Says Bob McNally

Bob McNally, president and founder of Rapidan Energy Group, said that despite oil market optimism, he believes the Strait of Hormuz will close once again unless the US and Iran make major progress on a deal over the weekend. McNally said that his estimate is that it will take at least 3 to 4 months for the oil market and supply traffic to revert back to pre-war levels once there is a deal and that there are some oil fields that may be permanently closed.

A handful of oil tankers were racing toward the Strait of Hormuz on Friday after Iran declared it open, even as industry groups urged caution and several shipowners and traders said they needed more clarity about the status of the waterway before making any decisions.

The oil market was left reeling by a stream of headlines, after Iranian Foreign Minister Abbas Araghchi sent prices plunging with the announcement that the Strait of Hormuz was “completely open” as long as the ships followed the previously announced routes through its waters — a statement that was quickly repeated by US President Donald Trump.

However, Iranian media later reported that ships and cargoes linked to “hostile” countries would not be allowed through, that any transits must be arranged with its authorities, and that it would close the strait if the US blockade of its own shipping continues.

A full reopening of the strait would free up millions of barrels of crude oil and fuel stuck inside the Persian Gulf, in turn allowing the region’s producers to begin ramping up shuttered production. The effective closure of the strait already eliminated well over 400 million barrels of oil and fuel shipments as well as a swath of natural gas cargoes, driving up prices and eating away at global growth.

Bloomberg spoke to over a dozen ship owners, agents, brokers and traders, most of whom indicated that they intended to take a wait-and-see approach for now. The world’s largest international shipping association, Bimco, said it believes shipping companies should consider avoiding the area.

However, by late Friday, at least eight tankers inside the Persian Gulf appeared to be heading towards the strait, according to vessel tracking data compiled by Bloomberg.

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