Oil: Hormuz traffic and policy risks – MUFG

Derek Halpenny of MUFG examines how uncertainty around the Strait of Hormuz and tight US fuel inventories are influencing crude prices. Conflicting shipping estimates, diplomatic signals, and significant reductions in distillate and gasoline stocks keep energy markets highly sensitive to supply expectations. US President Trump announced the Strait of Hormuz was cleared of mines, though some doubt its veracity.

The US Energy Secretary claimed the US Army facilitated over 15 million barrels of oil through Hormuz in a single day, with a 7-day average of more than 8 million barrels. Tracking data suggests this is an exaggeration, though untracked ships could account for the discrepancy. The true number likely falls within this range, still remarkable.

Oil prices respond more to positive news and declines than to negative news. A New York Times article on Tuesday indicating the US might return diplomats to the Middle East helped drive prices lower, but some of that decline reversed on Wednesday. Iran's deal with Oman, seen as defiance by Iran, could prompt a US response. US Energy Information Administration (EIA) data showed distillate inventories are at their lowest level on record on a seasonal basis.

After a drop to fresh six-day lows, GBP/USD gained some upside traction, trading near the 1.3600 barrier on Thursday. The cautious market sentiment supports the US Dollar ahead of Friday's data releases and Fed Chair Jerome Powell's speech. EUR/USD regained composure, climbing back into the mid-1.1600s on Thursday. The pullback was due to modest gains in the US Dollar as traders focus on Friday's Non-Farm Payrolls (NFP) revision and Chair Powell's address at the Jackson Hole Symposium.

Gold fell to new weekly lows around $4,570 per troy ounce on Thursday, remaining on the back foot despite overall caution and the lack of clear direction for the US Dollar. Cryptocurrency prices were generally up on Thursday, with Bitcoin nearing $80,000.