PHOTO: REUTERS/FILE

REUTERS, Launceston

A consistent theme in global oil markets since the US and Israel attacked Iran is that the effective closure of the Strait of Hormuz will be short-lived, and therefore so will the disruption to the supply of crude and refined products.

That expectation has consistently been reflected in pricing for crude oil futures, which have risen sharply since ​the conflict began on February 28, but are still well short of the highs reached in the wake of Russia’s invasion of Ukraine in 2022.

In effect, the paper crude market has believed ‌US President Donald Trump’s slew of social media posts since the bombing started that the conflict will be short, and result in Iran accepting US terms for a peace deal.

The problem is that the reality on the ground doesn’t match the social media claims, and the longer the Strait of Hormuz remains closed the more severe the energy crisis will become, especially in Asia.

Brent crude futures fell 9.1 percent on April 17 to end at $90.38 a barrel in the wake of Trump’s post that the Strait of Hormuz was fully ​open. But they jumped 6.9 percent in early Asian trade on Monday to $96.59 when it became clear the waterway was still closed.

The latest round of optimism that the Strait of Hormuz would re-open began after a Trump social media post ​on April 17 that the waterway that carried as much as 20 percent of the world’s crude oil and refined product supply prior to the war was “fully open and ready for full passage.”

Trump’s assertion was even backed by elements within the Iranian government, but the optimism proved short-lived as Iran’s Islamic Revolutionary Guards Corps moved to keep the strait closed, given Trump’s decision to maintain a US ​naval blockade of Iranian ports.

There are several questions that the market should be asking about the current situation.

Does this mean that the Strait of Hormuz is now effectively being closed by the United States?

Would it re-open if Trump ended ​the blockade of Iranian ports?

Is there sufficient trust between the warring parties to accept a principle that the strait should be open to all?

Who is really in control in Iran, and are they willing to negotiate with a US administration that has a track record of abandoning agreements?

While these are issues for debate, the only fact that really matters is that the strait isn’t open and the risk of attack is likely to keep it that way for the hundreds of vessels waiting either side of the crucial waterway.

SUPPLY STRESS

In ​the meantime crude oil and refined product supply chains are becoming more stressed, especially in Asia, which was the destination for about 80 percent of all the shipments via the Strait of Hormuz prior to the conflict.

While crude futures have ​largely traded on the daily news flow and an underlying optimism that the conflict will be of a limited duration, physical oil and refined products have reflected a more dire near-term supply situation.

Refined products in the Asian trading hub of Singapore have ‌remained at extreme levels, with jet fuel ending at $204.13 a barrel on April 17, more than double the $93.45 close on February 27, the day before the war started.

Gasoil, the building block for diesel, ended at $145.27 a barrel on April 17, up 59 percent since the conflict started, although down from the record $199.89 hit on March 30.

The problem for Asia is that the worst of the supply crunch is probably still to come, as crude shipments into the region fall sharply.

Asia’s seaborne crude imports are estimated at 20.62 million barrels per day (bpd) in April, down from 22.36 million bpd in March, according to data compiled by commodity analysts Kpler. However, both March and April are well down on the 26.76 million bpd average for the ​three months prior to the attacks on Iran.

The situation ​is especially worrying for countries that are major refining centres and exporters of fuels to the region.

Singapore’s crude imports are forecast at 388,000 bpd in April, down from 715,000 bpd in March and 980,000 bpd in January.

South Korea’s crude imports are estimated at 1.68 million bpd in April, down from 2.24 million bpd in March and 2.74 million bpd in January.

Japan’s April imports are expected to be ​921,000 bpd, a drop from 1.63 million bpd in March and 2.16 million bpd in January.

Only India is bucking the trend, with April imports estimated by Kpler ​at 4.67 million bpd, up from 4.45 million bpd in March, but below January’s 5.15 million bpd.

India has been able to secure Russian oil to help offset the loss of barrels from the Middle East, with 1.64 million bpd arriving in April, up from 1.06 million bpd in February.