Commodities▲ Bullish
Iran Standoff on Hormuz Worsens Oil Supply Crunch, Gas at Risk
China crude imports fell 24% in July as Hormuz attacks cut Middle East supply by 5M bpd. Natural gas eyes $2.81 resistance ahead of EIA outlook.
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Oil markets are pricing a deeper supply shock from the Strait of Hormuz. Iran and Oman are finalizing a deal to create new shipping lanes. Iran has said the strait will not open fully until the US meets several demands, including compensation for American assaults. The Houthi-aligned group attacked Saudi Arabia's Jazan refinery. Abu Dhabi National Oil Company reported 15 vessels hit in the strait, the report said.
Chinese crude imports fell to 7.78 million barrels a day in June and July. That is 4.21 million bpd less than the 11.99 million bpd average before the conflict. July imports alone dropped 24.3% from a year earlier, the report noted. Rest-of-Asia imports totaled 22.82 million bpd in July, roughly 4 million bpd below the pre-conflict average. Middle Eastern exports are constrained by about 5 million bpd, the report said.
Supply outside the Gulf is picking up slowly. Russian crude and condensate production rose 100,000 bpd in July to just above 9 million bpd. Drone strikes on refineries and constrained Black Sea shipping will limit that improvement, the report added.
Natural gas faces a different dynamic. U.S. inventories are healthy, according to the latest EIA storage data. The strait remains critical to global LNG movement. The EIA's Short-Term Energy Outlook, due August 11, will be the next major catalyst for U.S. gas, along with updated storage and LNG-export forecasts. For a broader look at natural gas positioning, see Natural Gas: 207K Shorts Face Heat Test as Front-Month Holds Support.