Iran has stepped up attacks on oil tankers transiting the Strait of Hormuz, threatening a fragile rebound in Persian Gulf crude exports.
Nearly 20 commercial ships, mostly oil tankers, have been attacked in the past month while passing through Hormuz, the Persian Gulf or off the coast of Oman, according to the Joint Maritime Information Center, a group of U.S.-allied militaries that provide security updates to merchant ships.
Iran attacked about two ships for every 100 ships passing through the strait in the third quarter, said Michelle Wiese Bockmann, senior maritime intelligence analyst at Windward, which tracks ships on behalf of defense ministries and governments.
Oil flows through Hormuz now depend on a major U.S. military commitment to protect tankers transiting along a southern route along the coast of Oman.
With the security situation in Hormuz remaining dangerous, it is unclear how long the rebound in crude exports can be sustained in the absence of a negotiated settlement or capitulation by Tehran.
Shuttle system
In many cases, tankers transport crude through Hormuz and then transfer the oil to ships in the Gulf of Oman that transport it to Asia. This shuttle system reduces exposure to Iranian attacks, but also requires more ships to transport the oil.
“No one in Washington thinks this is financially viable,” said Bob McNally, chairman of Rapidan Energy and a former energy adviser to President George W. Bush, referring to U.S. military involvement in the Gulf, ship-to-ship transfers and rising oil tanker tariffs. “This is an inefficient way to move raw materials, not just oil, out of Hormuz,” McNally said.
Crude oil shipments passing through Hormuz fluctuate daily, sometimes reaching or even surpassing pre-war levels in Iran, according to data from Kpler, a company that tracks global tankers and trade flows.
At other times, exports are lower than pre-conflict volumes. Shipments averaged about 10.3 million barrels per day for the week ended Saturday, about 23% below the pre-war baseline of 13.5 million bpd, according to Kpler data released Monday.
Windward estimates that crude passing through Hormuz averages 9 to 10 million b/d, compared to 14.5 million b/d before the war.
Although crude flows are volatile, they have intensified compared to the start of the war, as the US military managed to carve out a shipping route along the coast of Oman, analysts say.
High costs
But shippers move crude through Hormuz at a high cost in terms of their crews’ lives and freight and insurance rates, Bockmann said. Since July, at least nine sailors have died, 18 injured and three are missing, according to the International Maritime Organization, a United Nations agency.
“The volumes are coming, but they are coming at a time when maritime risk is extremely high,” Bockmann said. As security has deteriorated, the cost of transporting crude oil from the Persian Gulf to China has skyrocketed, reaching $1 million per day per tanker.
“Oil flows have recovered because market participants have accepted greater operational complexity and higher costs,” Richard Meade, editor-in-chief of Lloyd’s List, a London-based maritime industry trade publication, said at a press briefing last Thursday.
But the threat to tankers remains the same, Meade said. Prices for Brent oil, the international benchmark, still hover around $100 a barrel, even as more crude comes out of Hormuz.
“If the market believed this was sustainable, I think prices would be a lot lower,” Rapidan’s McNally said. Prices remain high because “it remains expensive to deliver, insure and transport crude to consuming regions where benchmark prices are set,” he said.
And even as more oil flows, freedom of navigation in Hormuz has not been restored, McNally said. Tehran continues to assert that it controls the strait.
Iran’s Revolutionary Guards stopped an oil tanker crossing the strait on Monday and ordered the vessel to turn around or face attack, according to an incident report from the UK’s Maritime Trade Operations Centre. The ship complied.
“The oil market is not getting any safer,” Meade said. “It is becoming increasingly effective in operating in a context of lasting insecurity.”
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