Oil Markets: Gulf Barrels Return And Mini-Glut Emerges

The reopening of the Strait of Hormuz has created a temporary 'mini-glut' of Middle East crude as a backlog of stranded tankers clears. This supply surge is pressuring short-term prices despite a structurally tight 3Q outlook and weak demand from key buyers like China.

Key Takeaways

• 1.The reopening of the Strait of Hormuz has triggered a near-term supply surge of Middle East oil, creating a 'mini-glut' that offsets the underlying market deficit.
• 2.China's oil import demand shows structural decline due to electrification and fuel switching, acting as a key swing factor in the current supply recovery.
• 3.The surge in supply is expected to be temporary, with the market likely to rebalance as the backlog of stranded tankers clears and IEA stock releases conclude in July.

Table of Contents

• Oil markets
• Disclosures & Disclaimer
• No country for bears
• Short-term oil glut amid market deficit
• More sellers than buyers
• Strait of Hormuz daily traffic, number of ships – Excel available on demand
• Estimate of crude and product daily exports from the Middle East Gulf (mbd)
• Physical market weakens
• Crude price benchmarks (USD/b)
• Brent curve, current, -1m and -6m
• Brent futures, 1-month/2-month spread
• Backlog of stranded tankers exhausted within weeks
• Shipping logistics:
• Will China buy more crude oil?
• Context: China oil imports collapsed, helping to rebalance oil market
• China total crude seaborne imports y/y by region (weekly, mbd & %)
• Rest of Asia in no rush to buy Middle East oil
• US inventories could start rising again
• Recent HSBC Oil & Gas macro research
• Disclosure appendix
• Disclaimer

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