Oil and gas tankers are increasingly avoiding the Hormuz shipping strait that links the oil-rich Persian Gulf to the open seas after the US and Israel bombed Iran, with Iranian media saying the waterway is “practically closed.” Ships reported hearing a radio broadcast purporting to come from the Iranian navy announcing that transit through the waterway was banned. There’s been no formal announcement from Tehran about the status of the strait, which is crucial for the flow of oil and gas. Some tankers have turned around as they near Hormuz, and at least one shipowner decided not to send a vessel into the strait as a result of the broadcast, according to a person familiar with the matter. Still, some ships appear to be continuing their journeys through, according to vessel tracking data compiled by Bloomberg. The semi-official Tasnim news agency, describing the waterway as effectively shut, said Iran’s Revolutionary Guard warned ships that transiting Hormuz is not safe. This is the first signs of disruption to commodity markets from the US decision to attack Iran, though it’s unclear how long it will last. The Strait of Hormuz is one of the most important focal points at times of tension with Iran, because a fifth of the world’s seaborne oil and liquefied natural gas goes through it each day. Tehran has in the past threatened to block it, but has never fully closed it. Traffic had already slowed significantly in the wake of the attacks, and Bloomberg reported earlier that tankers were piling up both inside and outside of the entrance into the strait. The US issued a warning to shipping that vessels in the region should stay 30 nautical miles away from its military assets. Japanese giant Nippon Yusen KK earlier told its fleet not to navigate Hormuz, while Greece told its vast merchant fleet to reassess passage, according to a circular seen by Bloomberg. One owner had said they interpreted the US advisory as effectively closing the waterway. The warning from Greece’s shipping ministry also told ships to be ready to use “conventional” navigation methods that don’t use electronics, citing the risk of interference while sailing in the region. A prolonged disruption would send shockwaves through the oil market. Futures markets are closed on Saturday and Sunday, giving reduced insight into how traders are really pricing risk.
However, a retail trading product, run by IG Group Ltd., was pricing West Texas Intermediate as high as $75.33 at one point, a gain of as much as 12% from Friday’s close.
Oil tankers are coming to a stop on both sides of Hormuz, with three vessels halting journeys out of the Persian Gulf and a small flotilla of at least 8 tankers building up over the past two weeks outside the Gulf of Oman. Others are aborting their voyages part way through the waterway. At least three gas tankers going to or from Qatar have paused voyages to avoid the waterway, according to ship-tracking data. Qatar is the world’s second-largest LNG exporter, making up 20% of supply last year, and the country’s shipments must pass through the Strait to reach buyers in Asia and Europe. Some shipowners were considering canceling already-fixed voyages into the Middle East, shipbrokers said, citing a war clause that gives them the right to do so should hostilities break out between a list of countries including the US and Iran. This could tighten the supply of vessels in the region, further supporting high freight rates that have recently soared to the highest level in years.
NN: In the grey market they are quoting Brent a little north of $80.00 a barrel