Oil: Supply shock deepens as Hormuz flows collapse – Societe Generale

Societe Generale strategists Michael Haigh, Ben Hoff and Jeremy Sellem, highlights rapidly falling Oil flows through the Strait of Hormuz and accelerating shut‑ins. With limited pipeline rerouting and Gulf refining outages, global product balances are tightening and prices are spiking, forcing a rebalancing through higher product prices and policy responses worldwide.

Hormuz disruption tightens global oil products

"Estimated flows through the Strait of Hormuz continue to fall fast. We estimate that flows are roughly 0.5 mb/d, meaning oil passing through the Strait is down by 19.5 mb/d relative to average flows. Accounting for redirection through regional pipes leaves around 17 mb/d of stranded oil."

"With exports stranded and limited pipeline-rerouting options, almost 2mb/d of Gulf refining capacity has been taken offline due to the constraints but also due to attacks on the infrastructure tightening global product balances resulting in spiking prices."

"Europe remains relatively insulated for now thanks to ongoing draws on its product inventories. The region holds nearly 70 million barrels of jet fuel across commercial and strategic tanks, enough to offset up to a 300 kb/d shortfall in Gulf‑sourced supply for several months and soften the initial impact. Even so, pressure is mounting rapidly across middle distillates—most notably diesel and jet—given the Gulf’s role as a major supplier to Europe, Africa and of course Asia."

"Tightness is also emerging in naphtha, which is vital for Northeast Asia’s petrochemical sector, and reduced LPG shipments from the UAE and Qatar are already lifting propane markets. As a result, the system is being forced to rebalance through higher product prices."

"Meanwhile, shut‑ins are accelerating rapidly, already nearing 7 mb/d and potentially pushing into double‑digit territory within days."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)