Let's Get Physical!

From Paper to Actual Barrels

As the war between the United States and Israel against Iran enters its second month, we are also entering a more fraught period of the oil supply shock. The last cargo left the oil terminals of the Arab petrostates of the Persian Gulf on February 28^th. Typically, a tanker’s voyage to Asian destinations takes:

· 20 days to Asian destinations

· 30-35 days to European and African destinations

· 40-45 days to the U.S. Gulf Coast

So far, the turmoil in the oil markets and the surge on prices reflected mostly trading “paper” barrels. At the same time, Iran’s effective closure of the Straits of Hormuz has not only prevented oil tankers from going through, but it has forced Kuwait, the UAE, Iraq and Qatar to shut down oil production as their storage capacity filled up, for a total of about 10 millions of barrels per day (mbd) Now, with the first tankers reaching their destination, we will be moving to an actual gradually worsening physical shortage.