U.S. energy chief says oil exports through Strait of Hormuz, Gulf will ‘continue to rise’

Rebecca Babin, senior energy trader and managing director at CIBC Private Wealth, joins BNN Bloomberg to discuss the state of the energy sector.

WASHINGTON -- U.S. Energy Secretary Chris Wright said on Tuesday that ship traffic in the Gulf and oil exports through the Strait of Hormuz are rising even as Washington and Tehran struggle to reach a deal on ending their more than three-month-old war.

“I would say rising very meaningfully,” Wright said when asked how ship traffic is flowing through the strait compared to a week or two ago. He said oil exports through the strait and the Gulf have risen and “will continue to rise.”

Wright made the remarks during an Atlantic Council conference and added that it would take many months to get back to normal flows of energy and critical materials such as sulfur, helium and lubricants once lasting peace is reached.

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Vessel movements on the Strait have been largely blocked since U.S. and Israeli strikes on Iran in late February, interrupting around 20 per cent of global oil and liquefied natural gas supplies. But some vessels have since begun transiting the narrow waterway bordering Iran, often with transponders turned off and under cover of darkness.

Disruptions to normal flows have triggered a surge in global energy prices, upending economies around the world and creating a political vulnerability for U.S. President Donald Trump and his Republican party ahead of midterm elections in November.

Washington has been pressing for a peace deal with Tehran that would include a full reopening of the Strait.

Global Brent oil prices fell more than three per cent on Tuesday to US$91.34 a barrel after Iran and Israel halted strikes on each other, following an appeal from Trump, though both sides warned they could resume hostilities.

Wright said oil has not risen more during the war in part because global inventories, especially in China, were “more than we thought.” He said China’s oil imports fell about 4 million barrels per day in May as the country drew down inventories but said that change does not represent price-driven demand destruction.

(Reporting by Timothy Gardner; Editing by Mark Porter, Alexandra Hudson and Sanjeev Miglani)