Let's Do Some Math on the Strait of Hormuz Problem
I got to thinking about how the math might work if some recent developments all come together as planned related to the shutdown of tanker traffic through the Strait of Hormuz, and put it in an X post a little bit ago:
Full Text:
Strait of Hormuz Update: Let’s do some math.
Per the EIAgov, Prior to the Conflict in Iran, roughly 20.7 million barrels of oil per day flowed through the Strait.Of that, about 7.6 mmbpd flowed to China.
About 2.9 mmbpd flowed to India.
Iran is now allowing oil to flow to China, and is negotiating a deal with India, meaning that soon, 10.5 mmbpd could be back on the market.
Saudi Aramco CEO Amin Nasser says its East/West pipeline can carry 7 mmbpd to the Red Sea.
Now, we’re up to 17.5 mmbpd.
Add in the 2-3 mmbpd that will soon begin to flow via the IEA strategic reserve release, and you are suddenly right at that 20.7 mmbpd number.
Oh.
That’s if - and it’s a big IF - all goes to plan.
No wonder crude prices have started dropping today. Oil traders can do math, too.
[End]
Granted, there are a lot of variables and moving parts to all of this, but it’s all within the realm of possibility as we sit here today. Iran is already allowing oil to flow to China. It’s a fraction of the 7.6 mmbpd as of right now, but a week from now, who knows?
Iran’s talks with India are in the early stage, but in a week? Again, who knows?
Iran might find a way to bomb that Saudi pipeline, but so far has not even tried and appears to be running rapidly out of the ability to launch its missiles accurately.
Crude traders see all of this happening, possibly coming together to provide real relief to the situation. That eases their anxiety and prices begin to drop, if only slightly at this moment.
One likely outcome from all of this upset will be that you can bet that every one of those oil exporting countries along the Persian Gulf will be investing in new pipelines to provide optionality to take their crude to either the Red Sea, the Indian Ocean, or the Mediterranean Sea once things settle down.
We may well be living through the last period of time in which the Strait of Hormuz serves as a major choke point for global crude supply.
What a blessing that would be.
That is all.
The emphasis should be on building more refineries to meet the materialist demands of humanity for the products and transportation fuels MADE FROM crude oil.
Crude oil by itself is useless black tar, unless you build a multi-billion-dollar refinery to break it down to produce various types of transportation fuels, and oil derivatives that are the basis of the products in our materialistic world.
“Iran is now allowing oil to flow to China, and is negotiating a deal with India, meaning that soon, 10.5 mmbpd could be back on the market.”
How so when the Strait of Hormuz is currently closed ?? Iran is preventing any oil tankers to pass thru S of H.
Please explain how 10.5 mmbpd of Iranian oil “could soon be back on the market” when it cannot be transported while the Strait is closed to ALL traffic.