The effect of these events on oil prices has been more marked than OPEC+’s largely expected decision to extend the oil production cuts of 1.2 million bpd into the first quarter of 2020. Pricesspiked towards the end of June, when reports began emerging that insurers are upping their premiums for tankers passing through the Strait of Hormuz and they haven’t fallen much from that level.
The effect events in the Persian Gulf and the Gulf of Oman from the last two months have had on oil prices will last until tensions between the U.S. and Iran, and Iran and Saud Arabia subside, that’s for sure. Higher insurance premiums are only one aspect of this effect, by all means an important one.
One other aspect of this effect was expressed by RBC’s head of commodities Helima Croft to the NYT. Croft noted that what happened to oil prices in the wake of the attacks highlights the importance of Strait of Hormuz as a global oil artery even at a time when many believe U.S. production can offset any drop in supply elsewhere.
“There is no way the market is insulated from that because of U.S. shale,” Croft said.OilPrice.com
Middle East Tanker Insurance Rates Soar 10-Fold
Irina Slav
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