It would be almost impossible to shut Strait of Hormuz


It would be almost impossible to shut Strait of Hormuz, because so many countries need it to be open, Spencer Welch, director of the oil markets and downstream team in the London-based IHS Markit told Trend.

The Strait of Hormuz is once again the biggest waterway in the news headlines, after Iran seized a British oil tanker in what is widely regarded as the world’s most strategically important passage for international trade. Twenty percent of the global oil supply flows through the Strait, which links the Persian Gulf with the Gulf of Oman and the Arabian Sea.

He noted that significantly higher tension than “normal” is having a slightly positive impact on oil price.

“But we consider a significant escalation unlikely. The tension has two effects to push the oil prices up: fear of lost oil supply and the damage of the conflict to trade and world economy, which creates fear about falling oil demand. Overall, the upward impact on prices tends to be more dominant,” noted the expert.

Welch pointed out that pil consumers need to maintain “emergency” supply in case of supply disruption.

“The International Energy Agency (IEA) recommends emergency oil stocks equivalent to 90 days of net oil imports. Almost 17-20 million barrels per day of crude oil travels through the Strait of Hormuz, which is almost 20 percent of the world’s oil demand. So it is absolutely vital. But because it is so vital, it would be almost impossible to shut the Strait, because so many countries need it to be open,” he concluded.