U.S. Energy Secretary Chris Wright just gave the market a number that helps explain why Brent crude isn’t trading at $150 per barrel.
Speaking at a Bloomberg Energy event in Houston on Friday, Wright said the U.S. military is now helping move roughly 7 million barrels per day (bpd) of oil out of the Persian Gulf. According to Wright, that’s about half of the oil that remains stranded following the disruption of tanker traffic through the Strait of Hormuz during the ongoing U.S.-Israeli conflict with Iran.
The figure is significant because normal flows through Hormuz are typically around 20 million to 21 million bpd, making the waterway the world’s most important oil chokepoint. If Wright’s estimate is accurate, current exports are running at roughly one-third of normal levels—far higher than many traders appeared to assume.
In fact, the market may have been pricing in a much worse situation. Rebecca Babin, senior energy trader at CIBC Private Wealth, said at the same event that oil prices in the upper-$80-per-barrel range suggested investors believed only 3 million to 4 million bpd were making it through the strait.
Brent crude futures were trading around $87 per barrel on Friday, down more than 3.7% on the day despite the continued disruption. That’s an astonishingly subdued price response considering that roughly two-thirds of normal Hormuz volumes remain offline.
The explanation may be that traders are now hearing the message that supply losses have not been as severe as feared. Wright said the U.S. military effort to escort or facilitate cargo movements began only recently and has not been publicly discussed.
“We have a military effort that we’ve not talked a lot about, which started more recently to get cargoes out,” Wright said.
Wright added that no Iranian crude is currently leaving the strait. He said the United States expects full flows to resume if a diplomatic agreement is reached with Tehran. If negotiations fail, Wright said Washington will continue working to restore oil movements through the region.
The comments offer the clearest indication yet that U.S. military involvement is playing a direct role in keeping at least part of the global oil trade moving.
By Julianne Geiger for Oilprice.com
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