Crude exports from the Strait of Hormuz have largely returned to levels seen before the outbreak of the Iran war, as oil producers and the shipping industry have found alternative ways to transport the crucial fuel out of the Middle East.
Pipeline exports and ship-to-ship transfers are among the methods being used, according to analysts tracking the situation, while the U.S. military continues to escort some ships. However, flows of refined products such as diesel remain limited, pushing prices up.
At least 16.5 million barrels per day (bpd) left the region in September, according to figures from global trade intelligence firm Kpler, equal to the pre-war average, excluding Iran. This figure is 10.5 million b/d higher than the monthly average for March, during the first weeks of the war in Iran.
Since the start of the conflict on February 28 with American and Israeli strikes against Iran, Tehran has sought to exercise its authority over the Strait of Hormuz and has sometimes even declared the closure of this strategic waterway.
However, Iran’s control appears to have diminished in recent weeks as oil exporters have found solutions to address the disruption.
About 40% of the region’s crude is now transported without passing through the strait, compared to just 17% before the war, via Saudi and Emirati pipelines, according to Kpler’s analysis. Saudi Arabia was able to restart operations of its east-west pipeline in late September after it was damaged in drone attacks, allowing exports to resume from the Red Sea port of Yanbu.
In a sign of other adaptations, the majority of crude transported through the Strait of Hormuz is transported on a shuttle fleet made up of mostly very large crude carriers, sailing with their satellite transponders turned off. The cargo is transported to different tankers in open water, usually off the coast of Oman or Fujairah in the United Arab Emirates.
More than 70% of the crude that passed through the strait in August changed tankers, while before the war almost no Gulf crude changed ships in the Gulf of Oman.
However, the region’s export recovery remains unbalanced and supplies of refined products remain limited.
This poses a problem for businesses and households that rely on refined products such as diesel to run their cars, vans and trucks.
The average price of diesel in the UK hit a record high of 199.18 pa liter on Monday, with many motorists already reporting prices above £2 on some forecourts.
“Diesel carries the highest risk,” said Kpler analysts, who found that less than 20 percent of pre-war levels of refined products shipped through Hormuz were being transported.
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They recorded a seven-day average of 677,000 b/d of refined products on Monday, compared to 3.6 million before the conflict.
Even though the region’s oil exports have increased, the level of threat to ships operating around the Strait of Hormuz has not disappeared.
“New routes emerge, goods are diverted, risks are considered and absorbed. The danger is to assume that resilience equals security. This is not the case,” said Richard Meade, editor of maritime publication Lloyd’s List. “Oil flows have recovered because market participants have accepted greater operational complexity and higher costs. The underlying threat remains.”
The danger to ships and their crews was highlighted on Tuesday, when three Liberian-flagged tankers were hit by projectiles while passing through the strait.
The price of crude remains at high levels and rose further on Thursday as traders balanced the resumption of some Middle East exports with uncertainty over a long-term solution to the conflict and the reopening of the strait.
The price of Brent crude briefly returned above $100 a barrel on Thursday, up 3% to $101.
The rise came after reports that China had suspended exports of petroleum products to regions beyond Hong Kong and Macau, a move that would add even more pressure to oil markets. Oil analysts said China’s move could suggest it was concerned about the availability of domestic products.
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