US Energy Secretary and Chevron CEO Disagree on Persian Gulf Oil Flow Figures

U.S. Energy Secretary Chris Wright announced that approximately 7 million barrels of oil are exiting the Persian Gulf daily. This volume represents about half of the oil previously stranded by the Strait of Hormuz chokepoint, with Wright crediting U.S. military assistance for this increase.

However, Chevron CEO Mike Wirth disputed the Secretary's assertion. Speaking shortly after Wright at a Bloomberg energy event in Houston on June 12, Wirth stated that the numbers observed by Chevron do not align with Wright's estimates, indicating smaller, albeit rising, volumes are trickling out.

The ongoing Iran war initially disrupted nearly 20% of the world's global oil flows. Wright estimated this disruption created a 14 million-barrel-per-day gap in typical flows of crude oil and petroleum products. He stated that current flows are approaching half of that gap and are increasing, with a goal to restore full flows. Wright referred to the 7 million barrels per day as a “rough estimate” that is rising.

Wirth acknowledged that ships have been transiting out, often with transponders off, typically at night, and with some U.S. military support. He noted that this has helped ease the fundamentals of the physical oil markets, demonstrating the market's adjustments on both supply and demand sides.

Secretary Wright also confirmed the U.S. aims to maintain a blockade on Iranian oil until a peace deal is finalized, stating that “zero” Iranian barrels are currently exiting. He described the military protection as “remarkably well” executed.

Oil prices have fluctuated, peaking at $138 per barrel in early April just before the first ceasefire was announced, well more than double the $61 at the beginning of the year. As of June 12, prices had declined to about $87 per barrel, the lowest since early March, amidst hopes of a permanent peace deal. This price moderation is attributed to rising U.S. crude exports from the Strategic Petroleum Reserve (SPR), smaller Chinese imports, conservation efforts in other countries, and increasing volumes moving out of the Middle East via pipeline and the Gulf.

Oil forecaster Dan Pickering, founder of Pickering Energy Partners, warned that if the Strait of Hormuz does not fully open, even with 7 million barrels a day exiting, another 7 million barrels a day are not. He suggested that larger price spikes are delayed but could still occur by the end of summer if oil flows do not return to normal, due to rapidly depleting emergency stockpiles. The nation’s SPR is shrinking to its lowest volumes since 1983 this week.

According to the U.S. Department of Energy, 66 million barrels have been drained from the SPR as of June 5 since the war in Iran began, out of an overall release of 172 million barrels authorized. Companies purchasing these barrels are pledging to replenish them. The SPR hit a three-year low of 349.2 million barrels on June 5 and is reportedly being drained by close to 9 million barrels every week. The Biden-era low for the SPR was 346.7 million barrels in July 2023, following the Russian invasion of Ukraine.

(Source: Fortune)