Iran's speaker says Hormuz will not reopen, while fuel through it is a fraction of normal

Parliament speaker Mohammad Baqer Qalibaf said on Sunday that the Strait of Hormuz will not open until seven conditions are met. As of September 28, tanker tracker Kpler had crude through the strait at a seven-day average of 13.5 million barrels a day, back at the pace before the war. Refined fuel, including diesel, was at 677,000 barrels a day, against 3.6 million before the war.

"The position of the Islamic Republic of Iran is completely clear and firm, and the Strait of Hormuz will not be opened until our seven conditions, based on the Islamabad Memorandum of Understanding, are met," he said.

The war began on February 28, when the United States and Israel struck Iran. In June the two sides signed that memorandum, a written understanding that later came apart. On September 26, President Donald Trump said he had rejected an Iranian proposal to reopen the strait and end the fighting.

"The Americans, who say something different in the media, have recently put forward proposals through a mediator. But they must understand that the period of dragging out the process and dictating one-sided demands is over," Qalibaf said.

Washington's reply came through Qatar.

"The Americans' propositions are more or less in line with their previous positions, specifically on the nuclear issue. We told them our focus in this stage is the issue of the Strait of Hormuz and the return to security in this waterway requires clear steps from the US," Foreign Ministry spokesman Esmaeil Baghaei said on Sunday.

Those steps, he said, include an end to interference with Iranian commercial shipping and a lifting of sanctions.

Foreign Minister Abbas Araghchi told ambassadors in Tehran the same day that a plan Iran has already offered could reopen the strait within seven days if Washington accepts it.

"If they again move toward military solutions, we are more prepared than before and will take whatever action is necessary to defend ourselves," he said.

Qalibaf pointed to the June memorandum. Araghchi told reporters on September 24 that the seven-point proposal closely mirrored that understanding. An official briefed on the talks said last week that the aim is an enhanced version of it, and that the two sides differ on the order of the steps, not on the contents.

On September 25, Araghchi said the seven days start only when the United States accepts. The first steps would take about four to five days, the strait would open on day six, and nuclear talks would start on day seven.

The offer Trump turned down would pause fighting for seven days, including in Lebanon. The United States would release at least $12 billion in frozen Iranian assets, waive sanctions on Iranian oil and lift its naval blockade.

How the crude got back

In August, more than 70% of the crude that crossed Hormuz switched tankers off Oman or the United Arab Emirates, Kpler said. The firm estimated that about 40% of Gulf crude was bypassing the strait by pipeline, against 17% before the war.

"It's very expensive and it's a huge U.S. military commitment," said Helima Croft, head of global commodity strategy at RBC Capital Markets, of the escorts that take ships through.

"The crude market has largely normalized even as refined product supplies remain constrained," Natasha Kaneva, head of global commodities strategy at JPMorgan, wrote in a September 29 note.

On Friday the G7 called for the right of ships to pass through the strait to be restored in full. The leaders said they would carry out commitments already made, taking into account what has already been fulfilled: a release of 100 million barrels over four months through the International Energy Agency, with a substantial diesel release in the first 20 days.

Two diplomats suggested the announcement was a reaffirmation of the March commitment. How much of the 100 million barrels is new is still open. The leaders said they will meet at the agency in the coming days to consider further diesel releases.

West Texas Intermediate crude fell 1.9% on Friday, to $91.11 a barrel. BUSO, the fund that holds near-term futures on that crude, gets its next price when the US stock market opens on Monday.

DBWET, the fund that holds futures on the cost of shipping crude, mostly the large-tanker run from the Middle East to China, rose 32.7% in the week ended Friday. John Kartsonas, founder of Breakwave Advisors, said in September that a large part of the high tanker price is fear, and that it would fall quickly once Hormuz looks normal again.

The next reply is Iran's. Baghaei said Tehran will review the remaining details and send further points to Washington through Qatar.