The United States is struggling to put together a coalition to protect the strategic Strait of Hormuz. Can they do it?
Francis Perrin : The United States has launched an initiative, as have the British. Will there be two coalitions, one led by the Americans and the other led by the Europeans, to secure oil traffic in the Gulf? I think there will be at least one. The British are up for it because they are on the front line, but the Germans refused to ally themselves with the Americans on this issue while the French are still between these two lines.
How important is the Strait of Hormuz to the oil industry?
The Strait of Hormuz is a major strait. The oil that passes through it represents 20% of the world’s oil consumption. It is also a quarter of world exports and a third of world exports by ship. It is 20 million barrels per day that passes there, knowing that the world consumption is about 100 million barrels per day.
Where does the oil that passes through it come from?
It is the oil of Saudi Arabia, United Arab Emirates, Iraq, Qatar, Kuwait and Iran. The first three countries nevertheless have other escape routes. Saudi Arabia can export some of its oil to the Red Sea, the United Arab Emirates has a seafront just outside the Strait. And Iraq has an Iraqi-Turkish pipeline that goes all the way to the Mediterranean. But, in practice, these states remain largely dependent on the Strait of Hormuz.
Can the Strait of Hormuz crisis have a significant impact on oil prices?
Since May, around ten ships have been affected. There were boardings and sabotages. When you have these kinds of incidents, the oil industry can’t help but be concerned. This strait is the main strait in the world for oil exports! The situation is serious, very tense and can lead to even more serious crises. But to this day, it remains relatively controlled. None of the ships sank and that was obviously done on purpose. If you put a lead above or below the bloom line, it doesn’t give the same result. These are incidents that allow Iran to say, ‘I am an important regional power. If you don’t want to respect me then I’ll show you that I have some nuisance capacity. It is a strong message sent but it is still a mastered game. For the moment, there is no panic otherwise, we would see it with oil prices which are very reactive. But when you play in such a sensitive region, it can get out of hand at any time.
Should we expect strong jolts in oil prices?
It may sound strange, but the prices are relatively stable. If we look at the extent of the changes, upward and downward, it is not considerable, compared to the variations that we have seen, including in recent years. It can give a false impression of calm. Price changes are relatively small because the market is characterized by a relative equilibrium between upward and downward forces. Three factors explain this relative stability. First, the slowdown in global economic growth. If there is less growth, it will have an impact on oil consumption. Then, trade tensions between China and the United States have plagued the oil markets for several months. The best example dates from 1is August: a tweet from Trump lowers prices by 6 to 7% in one day! Finally, US oil production will continue to increase in 2019 and 2020. We have not yet reached maximum production capacity, but the United States is already the world’s largest producer of crude oil. .
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