Oilprice.com

Two months after the U.S. and Israel bombed Iran on February 28, the Strait of Hormuz remains closed for most tanker traffic, forcing more than 10 million barrels per day (bpd) of crude output shut-ins across the Middle Eastern oil producers.

The two-month-long closure of the Strait of Hormuz is longer than analysts had expected at the start of the war. Most assumed back then that the Strait would open by April and producers could restart shut-in wells in May.

Even if the Strait of Hormuz opened to free tanker traffic today, oil supply from the Middle East will take months to start flowing again and reach consumers in Asia, who were the first to feel the supply shock.

The longer the chokepoint remains off limits to most tanker traffic, the worse the scars would be on global supply and economic growth.

The restart of thousands of oil wells across the Middle East would be a big challenge. Some countries would need weeks, but others – like Iraq – many months to bring wells back online, analysts and officials say.

Some wells may have been damaged, permanently, due to the hasty shut-ins in the early days of the war. Others will need new interventions and drilling to unclog, and output would not immediately return, even if the Strait of Hormuz is open unconditionally to all vessel traffic.

The oil market has lost hundreds of millions of barrels of crude since the war began. Losses are growing by the hour, and oil market participants may have finally caught up on the huge loss of supply that won’t be returning for months, even if the Strait of Hormuz reopened unconditionally today.

“In round numbers, the 1 billion [barrels] is baked in now because we have probably lost 600 million to 700 million at this stage, but by the time things get moving again, if they get moving again, it takes time to bring all back,” Vitol’s Hardy told the FT Commodities Global Summit.