More Oil, No Relief: Why Hormuz’s Supply Rebound Won’t Lower Prices

Persian Gulf crude exports have recovered to about 80% of pre-war levels, but oil remains stuck near $100 a barrel. 7 per barrel. Exports passed 14 million barrels a day last week for the first time since the Iran war began Feb. 28, The Kobeissi Letter noted.

5 million. S. military with securing the strait and opening a two-way corridor along Oman’s coast. 5 million barrels a day from Sept.

1 through Sept. 28. 45 million in August. Saudi shipments moved back through Hormuz after an attack on the kingdom’s East-West pipeline and Houthi strikes in the Red Sea.

Refined fuels are lagging. Gasoline, diesel and jet fuel shipments remain near 50% of pre-war levels because some damaged Gulf refineries have yet to fully restart, Kobeissi said. K. Maritime Trade Operations has reported seven strikes on vessels near the strait’s narrowest point since Sept.

28, the Wall Street Journal wrote. -backed route. S. Navy and don’t use south corridor at all and don’t put your life in danger,” said a radio message reviewed by the newspaper.

Targets included the Kuwaiti supertankers Al Funtas and Kazimah III, according to Kpler. Rory Johnston, founder of Commodity Context, estimates flows are down 2 million to 3 million barrels a day. “The recent pace of flows, while impressive, has never been sustainable and has already come at great expense,” he said. “The step-up in attacks on ships highlights how the current equilibrium in the oil market is fragile and could easily be shattered,” said Hamad Hussain, senior economist at Capital Economics.

The risk is higher because President Donald Trump is weighing renewed military action against Iran. The Cost of Supply A former Bridgewater economist Bob Elliot said the price math was simple when the war started. The economy was strong, supply was constrained, and Saudi Arabia couldn’t act as a swing producer. He estimated that a 10 million barrel-a-day shortfall should add $50 to $80 a barrel to pre-war prices near $60.

The rebound restored volume, but not low costs. Ship-to-ship transfers off Oman may have reached 7 million barrels a day in September, Elliot said, adding $30 to $40 to every incremental barrel. Shipbrokers told the WSJ each shuttle round trip costs $30 million to $40 million before insurance. Add longer voyages and higher insurance premiums, and “spot trading north of 100 bucks looks right in line with fair value,” Elliot wrote.

“All of this suggests that Middle East exports—at least for crude—are rising, but at enormous cost,” HSBC analyst Kim Fustier wrote. Consumers see even less relief. Extra crude does little to fix refining capacity, so spot crack spreads remain near all-time highs. Positive Outlook Futures point to relief.

Dated Brent trades in the $120s, while the futures curve prices crude in the $80s by next spring. Traded forward crack spreads have fallen about $20 a barrel. ” “Blockades have always been beaten by ingenuity over time; the question is largely at what price,” he wrote. ” Image via Shutterstock Read Also: Middle East Oil Flows Surge Above Pre-Conflict Levels Even as Tanker Attacks Escalate: What’s Happening in the Strait of Hormuz