Middle East oil market reshapes with new ship-to-ship transfer system
Middle East oil producers are using a new ship-to-ship transfer system off Oman's coast to keep exports flowing despite escalating regional conflict and threats between the US and Iran. This method cuts transit distance and reduces the risk of passing through the Strait of Hormuz, with exports nearing 6.5 million barrels per day in September.
) By Ron Bousso Sept 21 (Reuters) — The two conflicts that have dominated global energy markets are settling into a grim and costly stalemate, with neither showing any sign of a breakthrough. In Russia, Ukraine launched what was reported to be its largest drone attack yet on the Moscow region, killing three people and damaging part of an oil refinery in the Russian capital. Russia, meanwhile, has intensified its bombardment of Ukrainian cities, making recent weeks among the deadliest of the war.
In the Middle East, Yemen's Iran-backed Houthis fired missiles and drones toward the Saudi capital after making significant gains in the country's renewed civil war earlier this month. At the same time, Washington and Tehran exchanged threats. President Donald Trump warned that Iran would face economic collapse, or even the destruction of its leadership, unless it strikes a deal with the United States, and Iran's military responded by vowing severe retaliation against any new attack. Despite the volatile geopolitical backdrop, Brent crude extended last week's losses on Monday, slipping to around $101 a barrel.
The surprising calm is largely due to a development around the Strait of Hormuz. A new shuttling system is reshaping the Middle East oil market, as producers seek to keep exports flowing despite the escalating regional conflict. The question is whether this complex, expensive process is a stopgap measure or the global energy market’s new normal. Several miles off Oman's coast, south of the Strait of Hormuz, rows of tankers lie at anchor.
Many sit alongside each other, connected by ropes and hoses as they transfer crude from one vessel to another, creating a floating bridge between the Middle East's oilfields and the global market. Ship-to-ship transfers have become a lifeline for Gulf producers as they adapt to the disruptions caused by the Iran war, which has entered its seventh month. Once loaded, a tanker disconnects and heads for its destination, typically a refinery in Asia. The "mother vessel" then returns to the Gulf via Hormuz to reload and repeat the process.
The system cuts the distance any one ship must travel, reducing the risk of transiting the strait, even as an increasing number of tankers are crossing through a narrow corridor along Oman's coastline under US naval protection, with their navigation systems switched off. 5 million barrels per day so far in September, the highest since the brief spike after the June ceasefire, according to Kpler data. This operation is a testament to the energy industry's ability to adapt to supply shocks. Yet, it is also a sign of how costly and complex it has become to move oil out of the world's most important exporting region.
More on this in my latest column. In other news: Trump's Achilles heel: My colleague Jamie McGeever and I looked at how surging diesel prices across the world, and in the US in particular, have become a headache for President Donald Trump as the November midterm elections approach. Jet fuel crunch: Europe faces a fourth-quarter jet fuel deficit, even as it turns to far-flung suppliers including South Korea, which is set to boost its jet exports to Europe to a four-year high in September.
Qatar's hobbled output: The crisis over the Strait of Hormuz could delay some QatarEnergy expansion projects because critical equipment is unable to reach Qatar, its CEO Saad al-Kaabi said on Sunday, adding that QatarEnergy was producing only a "very minute" volume of liquefied natural gas. Back in Venezuela: Interim President Delcy Rodriguez on Saturday signed a memorandum of understanding with TotalEnergies that will allow the French oil and gas company to return to the country years after it was forced out. As ever, don't hesitate to contact me at or follow me on LinkedIn with any questions or thoughts.
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