Reuters is reporting that China is in direct talks with Iran to secure safe passage through the Strait of Hormuz for crude and Qatari LNG vessels. They cited three three diplomatic sources who are unnamed.
We're on day six of the US-Israeli conflict with Iran and the Strait is effectively closed for business, with about a fifth of global oil and LNG supply bottlenecked. Crude tanker transits collapsed from an average of 24 per day to just four on March 1. Around 300 tankers are sitting inside the Strait right now with nowhere to go and others can't get in to load once those ones leave.
Crude is up 15%+ since this kicked off and it's wildly bullish if the straight stays closed.
China gets roughly 45% of its oil through the Strait so Beijing has every incentive to push hard here. There's an interesting data point overnight — a vessel called the Iron Maiden switched its signalling to "China-owner" and transited through. Reports suggest only Chinese or Iranian-owned ships are currently getting waved through.
The key question for markets: does this become an actual framework for reopening traffic, or is it just Beijing carving out a special lane for itself while everyone else stays locked out? Because if it's the latter, that's not going to do much for Brent.
There do appear to be some positive signals today on energy as WTI crude is down $1.57 to $79.40. Earlier US Treasury Secretary Scott Bessent posted:
To enable oil to keep flowing into the global market, the Treasury Department is issuing a temporary 30-day waiver to allow Indian refiners to purchase Russian oil. This deliberately short-term measure will not provide significant financial benefit to the Russian government as it only authorizes transactions involving oil already stranded at sea. India is an essential partner of the United States, and we fully anticipate that New Delhi will ramp up purchases of U.S. oil. This stop-gap measure will alleviate pressure caused by Iran’s attempt to take global energy hostage.
Trump brushed off rising oil prices today but he's always been worried about gasoline prices so we will see how long he can tolerate them. You have to wonder if $80 WTI is a line they don't want to cross.
