What is well established about President Trump's newly announcedProject Freedomis that the U.S. military is helping "guide" commercial vessels out of theStrait of Hormuz.
The battle over the Hormuz chokepoint comes as theoil market appears to be one month away from a potential "tipping point."Without a resolution, traders warn that global crude and refined-product stockpiles could be drawn down to dangerous levels, creating dire conditions for another violent leg higher in fuel prices that could spark economic chaos.
Last week, ConocoPhillips was thefirst to warnaboutimminent "critical shortages" of oilfor some nations as the Iran war that has crippled global energy flows enters its third month.
"The biggest challenge we're about to face is that the markets sort of had a bit of a grace period initially when the tankers that left the Persian Gulf in late February were still on the water; now all of those have reached their destination," ConocoPhillips CFO Andy O'Brien told analysts last Thursday, touching on acritical subject we outlinedto readers at the start of April.
"We are going to start to see some import-dependent countries potentially start to face critical shortages as we get into the June-July time frame," at which point the dreaded "demand destruction" kicks in, O'Brien warned.
ConocoPhillips' ominous warning was followedvery shortly byPresident Trump's Project Freedomplan to provide military escorts for ships through Hormuz. On Monday, two US Navydestroyers transited the waterwayand entered the Persian Gulf after navigating an Iranian barrage of missiles, drones, and gunboats. This allowed two US-flagged ships to safely transit through the maritime chokepoint to safer waters.
Trump's Project Freedom appears to be a response to the dire warnings from oil giants and Wall Street analysts, who see demand destruction quickly approaching if the Hormuz chokepoint remains severely disrupted.
"We do not have months,"Frederic Lasserre, head of research at Gunvor, one of the world's largest oil traders, toldFinancial Times.
Lasserre warned that "huge pain" is comingfor some countries as fuel shortages appear imminent, adding, "It goes beyond gasoline at the pumps to industry shutting down, and you enter recession."
He gave a timeline of when the energy crisis could worsen:"The tipping point is clearly June. This is the point at which something has to give."
Source: ZeroHedge News
