-- Oil markets remain near $110 per barrel despite a blockade disrupting about 18 million barrels per day of supply, as three key adjustments absorb the shock, Vortexa said Thursday.
Two months have passed since the disruption in the Strait of Hormuz began, yet prices have risen only modestly over the past 10 days as markets rebalance supply and demand, David Wech, chief economist at Vortexa, said.
Complex shifts across supply, demand, flows, and inventories have helped stabilize markets, driven by three key factors: the Chinese miracle, the MEG pipeline rerouting, and the Atlantic Basin supply surge, Wech said.
China has sharply cut oil imports, with flows peaking at 16.6 million b/d on March 12 before falling by at least 6 million b/d, making it the largest contributor to easing supply pressure, Wech added.
At the same time, China increased onshore crude inventories by 800,000 b/d over two months, extending a 14-month stock build totaling 230 million barrels, Wech said.
Those added inventories alone could offset lost Middle East Gulf crude supply for about 2.5 months if stock draws begin, highlighting China's key role as a buffer.
Pipeline rerouting from the Middle East Gulf to ports such as Yanbu, Fujairah, and Ceyhan has added roughly 4 million b/d of consistent supply, with peaks reaching 5 million b/d in some weeks.
Meanwhile, exports from the Atlantic Basin and the Americas rose about 5 million b/d from January levels and 4 million b/d over the year in April, driven by crude, diesel, liquefied petroleum gas, and naphtha flows.
Roughly half of these additional volumes came from storage, including US Strategic Petroleum Reserve releases, while the rest stemmed from increased production.
These three factors have offset most of the Middle East Gulf supply loss, but support from China and the Atlantic Basin may weaken, making stock draws a more visible balancing tool in the upcoming weeks.
Markets remain adequately supplied for now, but rising adjustment costs and expected Asian demand for Atlantic crude could push prices higher if the Strait of Hormuz reopening remains unlikely.