Goldman Sachs says oil flow through Strait of Hormuz down 97% from normal levels

Investing.com - Goldman Sachs’ latest tracking report shows that as the conflict in the Middle East escalates, oil flow through the Strait of Hormuz has collapsed, with current transportation volumes far below normal levels.

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Based on vessel count statistics, the firm estimates that “the daily flow through the Strait of Hormuz has decreased by 97% compared to normal levels,” with recent transportation volumes stabilizing at around 600,000 barrels per day.

This disruption has dealt a significant blow to exports from the Persian Gulf. Goldman Sachs estimates that even considering partial rerouting through alternative ports such as Yanbu in Saudi Arabia and Fujairah in the UAE, the total reduction in regional flow has reached approximately 16 million barrels per day.

Production and refinery disruptions have also intensified supply shocks. The International Energy Agency (IEA) estimates that, as of March 10, losses in crude oil and condensate production have reached at least 10 million barrels per day, while refinery outages in the Middle East have risen to about 2 million barrels per day, with the UAE’s Ruwais refinery previously taking preemptive shutdown measures.

Governments are beginning to respond to the supply shocks, although Goldman Sachs expects these measures to only offset part of the disruption. IEA member countries have agreed to release 400 million barrels from strategic petroleum reserves (SPR), which implies a potential release rate of about 3.3 million barrels per day.

Goldman Sachs strategists wrote: “We assume that if flow through the Strait of Hormuz begins to recover from March 21, participating countries will release 213 million barrels of strategic reserves over the next 90 days at an average daily rate of 2.4 million barrels (faster than the peak monthly rate of 1.4 million barrels in 2022, because the current shock is much larger).”

They estimate that coordinated releases of global reserves and other policy measures could mitigate about half of the impact on global commercial inventories.

Markets are increasingly leaning toward the view that the disruption will last longer. Since earlier this week, Brent crude prices have surged from just below $90 to over $100 per barrel, and options markets currently imply about a 15% probability that Brent futures will expire above $100 in the coming months.

Forecast markets also suggest that the conflict may persist, as the probability of the war ending in March has fallen to around 19%, although the most likely outcome still points to a resolution between early April and mid-May.

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