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Oil stays rangebound as geopolitical chokepoints strain supply buffers
The Strait of Hormuz and Bab el-Mandeb move nearly 30 million barrels per day, and the report warns that key shock absorbers like the U.S. Strategic Petroleum Reserve are finite.
Oil prices have struggled to lock in a single narrative as geopolitical risk has repeatedly shifted, with WTI swinging from the high-$80s to below $70 after a U.S.-Iran peace deal and ceasefire in mid-June, before jumping back above $90 as attacks on shipping vessels in the Strait of Hormuz and Red Sea resurfaced, according to Action Forex. Prices have since settled in a roughly $80 to $85 per barrel range.
Action Forex said the two main shipping chokepoints, the Strait of Hormuz and Bab el-Mandeb, handle nearly 30 million barrels per day of crude and refined product flows, equivalent to more than one quarter of global consumption, with Hormuz accounting for about 20 million bpd and Bab el-Mandeb about 8 to 9 million bpd. It noted that the Red Sea route can act as a pressure valve during elevated Hormuz risk, including allowing some producers to reroute exports westward, but that this safety valve becomes less effective when security problems hit both corridors at the same time.
While the supply shock has been more contained than some analysts expected, Action Forex attributed resilience to adjustment mechanisms such as rerouted barrels, large strategic reserve releases, rapid inventory drawdowns, reduced imports or use of stockpiles by buyers in Asia, and some demand restraint. The report cautioned that many of these buffers are temporary.
The outlet highlighted that the U.S. Strategic Petroleum Reserve stands at roughly 310 million barrels, down from about 700 million before the 2022 release program and at its lowest level since 1983, implying less capacity to cushion future disruptions if tensions escalate further. It said markets are now focused on how much additional disruption they can absorb as risk re-prices quickly.
Latest closeWTI crude $75.32 ▼6.2%