24.09.202609:41 Forex Analysis & Reviews: 17 Million Barrels Through Hormuz Is Clearly Not Enough

Oil has become cheaper but is overall moving within a channel after an almost 4% rebound on Wednesday, as the US again said significant volumes transit the Strait of Hormuz. The global benchmark Brent fell toward $102 per barrel, while WTI traded around $92.

US Treasury Secretary Scott Bessent said yesterday that "sometimes" 17 million barrels per day pass through Hormuz, although other market participants cite much more modest figures: Clarksons Research earlier this month estimated the daily volume at roughly 8 million barrels. Such a discrepancy of more than double is telling. It means US officials' claims about normalization of flows through the strait currently outpace what independent research firms actually record.

However, the current oil decline can be explained by the market partially unwinding the geopolitical risk premium amid a restoration of flows from the Persian Gulf and growing hopes for a diplomatic breakthrough between the US and Iran. At the same time, the physical market is far from fully normalized, so the potential for further decline remains highly sensitive to any new headlines. From this follows a direct chain: as soon as there is reason to doubt the reality of the claimed volumes through Hormuz, oil retains room for a rapid reversal back up, making the present drop more tactical than structural.

The proposed ban on diesel exports also unsettled markets. President Donald Trump said earlier this week that he urged his advisers to support a ban, and US diesel futures rose slightly after Wednesday's dip amid speculation that the White House is considering such restrictions. Energy Secretary Chris Wright clarified that the administration is working with refiners on voluntary supply reductions as an alternative to an outright ban, and API president Mike Sommers warned that limiting diesel exports could force refiners to cut output, temporarily lowering diesel prices but raising gasoline and jet kerosene costs. This implies that a diesel export ban would primarily benefit US diesel consumers but hurt motorists and airlines, for whom gasoline and kerosene prices would rise.

The diplomatic focus in the US has meanwhile shifted toward Trump's planned summit with China's Xi Jinping this week: when asked whether he would raise the Iran issue with Xi, Trump answered yes, which is logical given that China remains one of Iran's largest oil buyers despite supplies already limited by the US blockade.

In my view, the gap between Washington's official statements about normalized flows through Hormuz and the much more modest independent estimates, along with continuing attacks on ships in the strait, makes the current oil decline vulnerable to a quick reversal on any new incident. I do not rule out that Pezeshkian's UN rhetoric, which questioned the very possibility of free navigation without sanctions being lifted, will prove a more significant long-term factor for price than one-off statements about temporarily restoring transit volumes. Therefore, Brent could easily return above $105 at the first deterioration in the news background.

As for the current technical picture for oil, buyers need to take the nearest resistance at $92. That would allow a target of $96, beyond which a breakout will be fairly difficult. The farthest target is the $100 area. In the event of a drop, bears will try to seize control of $89. If they succeed, a range breakout would deal a serious blow to bulls' positions and push Oil down to a low of $87 with the prospect of reaching $84.