400 million barrels is not enough: why oil prices did not fall

Alexey Gromov, Principal Director on Energy studies at the Institute for Energy and Finance, commented to Forbes on the possible impact of the release of record amounts of strategic oil reserves on world oil prices in terms of the ongoing lockdown of the Strait of Hormuz.

The oil market is used to living in conditions of various crises and not trusting the statements of politicians about the imminent settlement of a conflict, Alexey Gromov notes. He draws attention to the fact that although the decision to allocate oil from the reserves of the IEA and the US strategic reserve has been made, it has not yet begun to be fulfilled, the US promises to gradually unblock the Strait of Hormuz have not yet been realized, but more than a dozen ships have been damaged while trying to pass through it.

400 million barrels is still a significant volume for the market, Gromov says. Saudi Arabia, the United Arab Emirates and Iraq redirected part of the supplies through the Strait of Hormuz to alternative routes, while Iran continues to send its tankers with oil, he recalls. So now, the expert says, the market is not receiving about 15 million b/d of oil from the Persian Gulf countries, and the released reserves of the IEA compensate for the loss of volumes for 26 days.

If the Strait of Hormuz is closed for another month or two, there will be no critical shortage of oil on the market, but prices will be high even with oil coming from strategic reserves, Gromov notes.