#夏日创作营 Once the Strait of Hormuz is also affected, how much buffer does oil price still have?

Today’s key judgment
On Friday (July 17), international oil prices surged sharply. WTI rose to $82.49 per barrel, while Brent climbed to $88.10 per barrel, with both posting the highest levels in more than a month. This week, the two major crude oil futures contracts collectively rose by about 16%. The market is re-pricing a risk that was previously under-estimated: Middle East energy shipping could face threats along two key routes at the same time. Market concerns have shifted from a single threat from the Strait of Hormuz to the Red Sea’s Strait of Mandeb.
After the US-Iran ceasefire agreement fell apart, Iran listed tankers transiting as targets for strikes, and oil transport volumes through the Strait of Hormuz have fallen markedly. Meanwhile, Iran said that if the US attacks Iran’s power infrastructure, it will prompt the Houthis to blockade the Strait of Mandeb. This means global energy markets face a new risk combination: the Strait of Hormuz affects crude exports from the Persian Gulf; the Strait of Mandeb links the Red Sea and the Indian Ocean, serving as an important passage for Middle East energy to Europe.
If both routes are affected at the same time, global crude shipping costs, insurance expenses, and supply risks could rise significantly. PVM Oil Associates analysts noted that although Saudi Arabia has already shifted large amounts of crude to the Red Sea coast via east-west pipelines, alternative transport capacity remains limited if problems occur simultaneously in the Strait of Hormuz and the Strait of Mandeb. Data show that Saudi Arabia has recently shipped crude via the Yanbu port at about 4 million barrels per day, versus about 973k barrels per day in the same period last year, indicating that Gulf producers have strengthened alternative-route construction in advance. However, the market has not fully traded according to the most extreme scenario. The number of US drilling rigs continues to increase, and the EIA expects US crude oil production to rise further next year. At the same time, crude oil loadings in Iraq during the first half of July increased sharply, providing some buffer on the supply side.
Overnight market data yesterday
WTI crude oil futures settlement price: $82.49 per barrel, up $3.54, up 4.48%
Brent crude oil futures settlement price: $88.10 per barrel, up $3.87, up 4.59%
Oman crude: $77.09 per barrel, up $0.73, up 0.96%
Shanghai crude oil night session: 542.90 yuan per barrel, up 27.00 yuan
Murban crude: $81.32 per barrel, up $3.59
Dow Jones: 52,146.42, down 406.55 points, down 0.77%
US Dollar Index: 100.74, up 0.01
USD/CNY central parity: 6.7934, up 25 points
Crude oil change rate: +11.95%
Estimated domestic gasoline and diesel prices: up 690 yuan per ton
Decomposition of long/short drivers
🔴 Positive factors: Two-route risks overlap, supply worries escalate
1 The US-Iran conflict further escalates.
On Friday, both sides continued to attack each other. The US struck bridges and airports inside Iran; Iran attacked Kuwait power plants and seawater desalination facilities, and for the first time carried out direct strikes on US targets inside Syria. The conflict has expanded from attacks on military facilities to risks involving energy and infrastructure.
2 Strait of Hormuz transport volumes decline significantly.
Gulf crude exports restored during the ceasefire are coming under renewed pressure. As tankers become attack targets, risk appetite among shipowners, insurers, and traders declines, and actual transport volumes may fall further.
3 The Strait of Mandeb becomes a new risk variable.
Iran has asked the Houthis to prepare for a blockade of the Strait of Mandeb. If the Red Sea shipping route is affected, global energy transportation will face additional pressure.
4 Two “energy lifelines” bear pressure at the same time.
The Strait of Hormuz and the Strait of Mandeb, respectively connecting the Persian Gulf and the Red Sea, are important nodes for global energy transportation. If both are blocked, the supply shock could be clearly larger than what the market had previously expected.
5 Strategic inventory buffers are shrinking.
Barclays noted that inventories are currently at low levels in recent years, and most strategic petroleum reserves have already been released, meaning new supply shocks may transmit to prices more easily.
6 Goldman Sachs flags extreme risks.
Goldman Sachs believes that if Gulf exports resume a standstill, Brent could break through $110 per barrel in the fourth quarter this year, indicating the market is re-evaluating upside risks from a supply disruption.
🟢 Negative factors: US production increases and supply restoration still provide a buffer
1 US drilling activity continues to rise. Baker Hughes data show that last week the number of US oil rigs increased by 7 to 452, up 30 year-on-year. The EIA expects that the increase in drilling activity will lift US crude production from 13.8 million barrels per day this year to 14 million barrels per day next year.
2 Iraq’s exports recover significantly.
Kpler data show that Iraq’s crude oil tankers loaded in the first half of July rose by more than one time to about 1.2 million barrels per day. Iraq’s export recovery provides some additional support to global supply.
3 Saudi Arabia’s replacement transport capacity is starting to work.
Through east-west crude oil pipelines, Saudi Arabia has shifted large volumes of crude to export via Yanbu port. Currently, crude shipments from Yanbu port are about 4 million barrels per day, showing that Gulf oil-producing countries have prepared replacement options in advance.
4 High oil prices may, in turn, suppress demand.
If oil prices stay at high levels, global economic growth, inflation pressure, and oil consumption will be affected. A decline in demand will limit how much oil prices can continue to rise.
5 Expectations for future US supply growth remain.
Although near-term supply risks increase, the ability to expand production from US shale oil remains an important buffer for the global market.
Current assessment
On the first day of the new cycle, the change rate directly reached +11.95%, driving this result mainly through inertia caused by the rapid rise in oil prices at the end of the previous cycle, plus the market re-pricing supply risks after the escalation of the US-Iran conflict. It is the oil price at the end of the previous cycle, just when the new cycle began; there is still a relatively long adjustment window afterward.
In the next two weeks, what truly determines the direction is:
whether oil flows through the Strait of Hormuz continue to decline;
whether there is an actual blockade at the Strait of Mandeb;
whether the US expands strikes against Iran-related energy facilities;
whether replacement supplies such as Saudi Arabia and Iraq can continue to increase.
If the conflict continues to expand, the size of the upward adjustment this round could further increase; if diplomacy restarts and shipping resumes, the upward expectations could fall markedly.
On the first day of the new cycle, oil prices have already sent a strong signal. But what truly determines the height of this rally is not how intense the conflict is—it's whether the two energy corridors can remain open at the same time.
This report’s content and viewpoints are for reference only and do not constitute any direct investment or operating advice$XTIUSD ‌