- Gulf Arab producers have reduced production since they are unable to export via the strait.
- Iranian missile and drone strikes have further harmed energy infrastructure in the Middle East.
The oil futures market has not fully priced in the scale of the supply disruption caused by the closure of the Strait of Hormuz, Chevron (CVX) CEO Mike Wirth reportedly said.
“There are very real, physical manifestations of the closure of the Strait of Hormuz that are working their way around the world and through the system that I don’t think are fully priced into the futures curves on oil,” Wirth said at S&P Global’s CERAWeek conference here, according to a CNBC report.
“We got a lot of oil and gas now that is not flowing into the market,” the Chevron CEO said. “There really is a difference in terms of physical supply this time versus prior incidents.”
Hormuz Route
The Strait of Hormuz has been a point of key discussions as Iran’s blockade of the key trading route has forced U.S.’s hands as the Gulf nation has become successful in pushing crude oil prices higher globally. The route holds almost 20% of global oil and energy supplies.
“The Hormuz Strait will have to be guarded and policed, as necessary, by other Nations who use it — The United States does not! If asked, we will help these Countries in their Hormuz efforts, but it shouldn’t be necessary once Iran’s threat is eradicated. Importantly, it will be an easy Military Operation for them,” Trump said in a past social media post.
Cut In Production
Gulf Arab producers have reduced production since they are unable to export via the strait. Iranian missile and drone strikes have further harmed energy infrastructure in the Middle East. Additionally, some governments are enacting measures to retain domestic supplies and limit exports, Wirth noted.
“How quickly that production can actually come back online is an uncertainty that we’re going to have to deal with as we go forward,” Wirth said, per the report. “It’s going to take some time to come out of this.”
The SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, climbed 0.3% at the time of writing, the Invesco QQQ Trust ETF (QQQ) was up 0.3%, and the SPDR Dow Jones Industrial Average ETF Trust (DIA) was 0.2% higher.
For updates and corrections, email newsroom[at]stocktwits[dot]com.