The Daily View: The signals versus the noise

IT HAS been an eventful few days for the Hormuz crisis, according to news reports and social media. For shipping markets, though, it has been the status quo.

The strait is still effectively closed, almost three months since the crisis began. It has been a case of the signals versus the noise.

The noise: proclamations of US-Iran peace deals by politicians and other sources, speculation by pundits, the price of oil futures and the level of US stock market indexes.

The signals: tanker spot rates, global flows of seaborne crude, Hormuz transits, the price of physical refined products in domestic markets, and inventory draws.

The real signal of normalisation will be a steady outflow of tankers loaded with floating storage cargoes from Middle East Gulf countries targeted by Iran during the war, together with a steady inflow of ballast VLCCs, allowing a restart of production by these Gulf countries.

Sporadic outbound transits of vessels trapped since the war began are highly positive for the crew that have been stuck on board and for operators with waylaid capacity. But these vessel movements do not imply market normalisation.

Nor do the occasional inbound and outbound moves of non-risk-averse Greek tonnage.

The real signal of normalisation may not seem imminent, yet optimism persists.

Bank of America surveyed 170 global fund managers this month, and the majority, 54%, believed the Strait of Hormuz would reopen by the end of June. Just 22% thought it would reopen in the third quarter, 6% in the fourth quarter, and 5% next year or later.

Tanker operators are a lot closer to the situation than fund managers, and at least some tanker operators are behaving as if they too expect a reopening.

There has been a persistent queue of 50 to 55 VLCCs waiting outside the Strait of Hormuz, positioned to re-enter the Middle East Gulf quickly. These vessels are abstaining from competition in the Atlantic basin, supporting VLCC rates.

It has been a long wait for these operators, rife with noise. Earlier this week, a tanker was attacked 60 nautical miles east of Oman. It was another signal, not the good kind.

Greg Miller
Senior maritime reporter, Lloyd’s List

Click here to view the latest Lloyd’s List Daily Briefing