Oil: Hormuz reopening drives staggered supply shock – Societe Generale

Societe Generale analysts Michael Haigh, Ben Hoff and Jeremy Sellem argue that reopening the Strait of Hormuz will unleash a double Oil supply shock into an already tightening market. They stress that logistics and tanker flows, not just upstream capacity, will govern timing, with physical relief for end‑users lagging headline reopening by several weeks.

Double supply shock and delayed relief

"Once the Strait reopens, tanker traffic resumes alongside a parallel release of constrained upstream supply. Two-barrel pools hit simultaneously: crude that physically could not move due to shipping and insurance constraints, and crude that was policy‑constrained by OPEC+ discipline. The UAE will, no doubt, accelerate production, while Saudi Arabia faces a strategic choice—defend aggregate restraint or respond defensively with its own barrels."

"Crucially, this re‑entry occurs while global crude and product stocks are already drawing, amplifying the price and flow impact. While production capacity is the binding constraint at the wellhead, the near‑term throttle is logistics: laden vessels queued on both sides of Hormuz. Facility restarts across the Gulf will not be instantaneous."

"Safety checks, system verification, gradual well ramp‑ups, and recommissioning of surface infrastructure imply weeks to months before nameplate output is restored; Kuwait has cited three to four months even in a best‑case political outcome. As a result, the first visible shock is not supplying growth but the sequencing and timing of barrel delivery into end markets."

"Adding this to shipping normalisation implies 45–50 days from a mid‑May Hormuz reopening to tangible end‑market relief in our base case, stretching to ~60+ days in more conservative scenarios. Bottom line: prices respond immediately to reopening headlines, but physical balance improves much later. This timing mismatch is the central risk for both policymakers and markets."

"Therefore, under our (SG) base case scenario of a reopening in the middle of May (let’s say 15th) tanker normalisation would take until June 24th. The best-case (100% normal flows) would be June 18th and in Kpler’s (worst) scenario it would be July 5th."

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