WASHINGTON (TNND) — American and Iranian negotiators have been working toward common ground that could lead to the reopening of the Strait of Hormuz, a trade route for one-fifth of the world’s oil. With a potential deal in sight, top energy executives have tempered expectations for when shipping traffic can return to pre-war levels.
American and Iranian negotiators have been working toward common ground that could lead to the reopening of the Strait of Hormuz, a trade route for one-fifth of the world’s oil. With a potential deal in sight, top energy executives have tempered expectations for when shipping traffic can return to pre-war levels. (TNND)
“It will happen slowly. I would expect there will be some stop and start to it,” Chevron CEO Mike Wirth told Bloomberg Television Friday morning.
Wirth said his company has multiple unpublicized reports of vessels coming under attack in the strait. Clearing out the thousands of ships currently stuck in the strait, he said, could take months. Before that can start, companies must be confident the water is clear of mines.
“They don’t all go out at once. You need weeks and weeks. Somebody’s got to prioritize, do bulk freighters go out first? Do the container ships go out first? Do U.S. allied ships go out first or last?” Wirth said, adding it’s unclear who will make those decisions.
Crude oil prices and in turn, gasoline prices, have declined in recent days on hopes the United States and Iran will at least extend their ceasefire with a memorandum of understanding that reopens the strait. Brent crude futures hovered around $91 for much of Friday, and the national average gas price dipped to $4.39, according to AAA, down 17 cents from the wartime high.
If that market optimism isn’t met with an actual deal soon, the reality check will be expensive.
“If there’s not a definitive deal, probably by early next week, I think oil markets could swing the other way rather wildly,” said GasBuddy lead petroleum analyst Patrick De Haan.
Terms for how the strait operates will be paramount. On Friday, before a meeting in the Situation Room about the pending deal, Trump posted on social media, “The Hormuz Strait must be immediately open, no tolls, for unrestricted shipping traffic, in both directions. All water mines (bombs), if any, will be terminated (we have removed, through detonation, numerous such mines with our great underwater mine sweepers. Iran will complete the immediate removal and/or detonation of any mines that are left, which will not be many!)”
Trump also used the post to announce his naval blockade on Iranian ports had been lifted. This marked a major shift from his previous assertions that the blockade would remain in full effect until a deal with Iran was reached.
Shortly after Trump’s post, Iranian state media outlet Tasnim News Agency reported Iran had not yet made a decision on whether to accept the latest draft of a memorandum of understanding. Tasnim said Trump’s post “is in line with his usual pattern of issuing one-sided and self-aggrandizing opinions.”
All of this has eaten up more time than Exxon Mobil senior vice president Neil Chapman said their industry doesn’t have.
“We’re approaching unheard-of inventory levels. I mean really, really low levels. You can debate whether that’s going to hit those really low levels in two weeks or three weeks. Once you get to that point, then you’ll see price shoot up,” Chapman said.
Another complicating factor: Iran and Oman seem to be planning for a future in which they have joint control the strait. Iranian Foreign Minister Abbas Araghchi said he spoke to his Omani counterpart Friday to discuss the strait’s “future administration in line with our sovereign responsibilities and international law.”
This scenario would be unacceptable for Trump, who said earlier this week that the United States would “watch over” the strait, but no one country should control it.
“Oman will behave just like everybody else, or we’ll have to blow them up,” Trump said.
De Haan doubts a deal that gives any nation control over the strait will see the light of day.
“That is simply, probably a non-starter at the very highest levels,” De Haan said. “I don’t think that the U.S. would accept any of that. I don’t think any real Middle Eastern countries would go along with that either because their livelihood depends on a free Strait of Hormuz.”
