Oil: Hormuz stalemate sustains inflation risks - Rabobank

Rabobank Senior Macro Strategist Bas van Geffen says the US-Iran stalemate and disruption in the Strait of Hormuz are keeping oil-driven inflation risks elevated. Inventories have cushioned reduced flows so far, but prolonged tensions could erode that buffer, while Venezuelan oil may eventually provide an alternative supply source.

Iran, Hormuz and Venezuela reshape oil flows

"It's increasingly difficult to see a way out of the US-Iran stalemate. Yesterday, the Qatari prime minister travelled to Tehran to try to revive the dialogue between Washington and Tehran, but President Trump thwarted hopes of diplomacy. The US president reportedly has no interest in reviving the memorandum of understanding, blocking mediators’ options to restart negotiations."

"Inventories have cushioned the impact of reduced oil flows for now, but as the stalemate continues and inventories deplete, the efficacy of the Hormuz closure increases."

"Closing the Strait of Hormuz is forcing exporting neighbours and importing countries around the globe to rethink their supply lines. As alternatives are developed, Iran’s ability to take the global economy hostage will wane."

"As a case in point, the US is negotiating a stake in Venezuela’s oil fields, and Venezuela is reportedly considering quitting OPEC."

"Still, it will take time for this alternative supply to come online. And that may require massive upfront investments, hence funding, at a time when there is already so much strain on budgets and competition for funding."