Crude oil flows through the Strait of Hormuz are reportedly increasing, ranging from 6 million to 8 million barrels per day, according to estimates from oil traders and shipping analytics firms. This uptick is helping to keep global crude oil prices in check, with Brent futures trading around $88 a barrel. However, these figures remain roughly half of pre-war levels, which were approximately 20 million barrels per day. The increase follows a period in July when Iranian attacks on supertankers led to a breakdown of a ceasefire and heightened risks to navigation. The resumption of negotiations between the US and Iran has also contributed to stymieing prices.
Producers across the Middle East, with the exception of Iran, are boosting exports. Saudi Arabia and Iraq have shown increased loading activity, with satellite images indicating a higher number of tankers at Saudi export installations and Iraq's loading activity briefly exceeding pre-war rates. Smaller producers like Qatar and Kuwait are also increasing their shipments, reaching about 70% of their pre-conflict levels of 2 million barrels per day. The United Arab Emirates was an early leader in ramping up exports.
A key strategy enabling these increased flows is the use of shuttle runs and ship-to-ship transfers outside the Persian Gulf. Tankers are hauling barrels to areas just outside the Gulf, where their cargoes are then collected by waiting tankers unwilling to transit the entire strait. This workaround, mirroring tactics previously used by Iran to evade sanctions, is now widely adopted by Gulf producers to bypass the most dangerous segments of the waterway. Kpler data noted a significant drop in direct transits through Hormuz, with only two commodity vessels recorded on one Monday, indicating a reliance on these indirect methods.
While Goldman Sachs previously projected that Hormuz flows might only recover to 70% of pre-war levels, the current data suggests that the combined efforts of Gulf producers and their innovative shipping strategies are managing to get substantial volumes of oil to market. However, the exact figures for total flows are difficult to ascertain due to some ships operating with Automatic Identification System (AIS) transponders turned off. Challenges remain, particularly in boosting exports of refined fuels like diesel and jet fuel, as about 1.6 million barrels per day of the region’s refining capacity remains offline. Iran's exports, meanwhile, are still halted by a US blockade.
