Folks, I’m sipping my coffee and reading about Energy Secretary Chris Wright’s latest claim that oil exports from the Middle East have risen above pre-war levels, and I’ve got to say, it’s a pretty bold statement. According to Wright, the oil flows were restored to normal levels after the US military coordinated a plan with allied Gulf nations to get crude through the Strait of Hormuz and Middle Eastern countries bypassed the waterway via pipelines or other export facilities. But, as it often does, the devil is in the details.
Now, I’m no expert, but it seems to me that Wright’s claim doesn’t quite add up. I mean, just 84 total vessels transited the Strait of Hormuz last week, including only nine on Sunday, according to Kpler, an oil market data service. That’s down from more than 100 transits a day before the war, and not nearly enough to carry the 9 million barrels per day through the strait that Wright claims has been traveling through the waterway. You can’t just magic up oil exports, folks.
It’s also worth noting that oil is getting out of the strait, but the number is closer to 4 million barrels per day, according to JPMorgan. And Matt Smith, director of commodity research at Kpler, said, “It is not possible to reconcile the disparity between what we see and what he is quoting.” That’s a pretty diplomatic way of saying that Wright’s numbers just don’t make sense.
Now, I know that Wright’s claim that 5 to 7 million barrels per day are bypassing the Strait of Hormuz via pipelines appears to be accurate. Saudi Arabia’s East-West pipeline alone has rerouted upward of 5 million barrels of oil per day to the Red Sea. But, as Dan Pickering, founder and chief investment officer at Pickering Energy Partners, said, “In theory, the US government with all its technology and all the military assets they have in the region should have the best number on the flow through the strait. But this is hard to verify. The administration is really trying to jawbone oil prices to the downside, as they have been doing for months.”
It seems to me that the administration is trying to spin the oil market in a positive light, but it’s not quite working. President Donald Trump has routinely claimed that the United States controls the Strait of Hormuz, a claim belied by the notion that military escorts are needed to shuttle commercial vessels in and out of the Persian Gulf and Iran has attacked 64 vessels transiting the strait, resulting in 17 seafarer fatalities and 35 injuries.
Helima Croft, head of global commodity strategy at RBC Capital Markets, said, “We are nowhere near normal, but they have had six months of success selling this market narrative.” And that’s the thing, folks – the market has adapted, and prices have remained relatively low considering the historic supply shock during the war. But that’s in large part because demand for oil collapsed and China drew down its massive oil stockpiles.
In conclusion, it seems to me that Energy Secretary Chris Wright’s claim about oil exports from the Middle East is a bit of a stretch. The numbers just don’t add up, and it’s hard to reconcile the disparity between what we see and what he is quoting. But hey, as they say, “a non-trivial amount of oil coming out of the Middle East is either on shadow tankers that are turning off their transponders or on vessels that are sailing under false flags to mask the fact that they are carrying sanctioned Iranian oil.” So, who knows, maybe Wright’s numbers are right, and I’m just drinking too much coffee 🙃.
Armchair patriot. Believes in the free market, cold beer, and that there’s always a guy named George behind every CNN segment.
Former remote-throwing champion turned #1 couch commentator on liberal panic in the media. Born in Texas (or so his mug says), he earned a degree in Fake Newsology & Beer Philosophy from YouTube University.
