Exports of crude 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 of transporting 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 US military continues to escort some vessels. However, flows of refined products such as diesel remain constrained, pushing prices higher.
At least 16.5m barrels per day (bpd) left the region in September, according to figures from the global trade intelligence firm Kpler, equalling the pre-war average, excluding Iran. The figure is 10.5m bpd higher than the monthly average for March, during the first weeks of the Iran war. Since the conflict began on 28 February with US and Israeli strikes on Iran, Tehran has sought to exert its authority on the strait of Hormuz and has at times even declared the strategic waterway closed.
However, Iran’s control appears to have declined in recent weeks, as oil exporters have found workarounds to address the disruption. About 40% of the region’s crude is now transported without transiting the strait, compared with just 17% before the war, through Saudi and Emirati pipelines, according to Kpler analysis. Saudi Arabia was able to restart operations on its east-west pipeline in late September, after it was damaged during drone attacks, allowing exports from resume from the Red Sea port of Yanbu.
In a sign of the other adaptations, the majority of crude transported through the strait of Hormuz is carried on a shuttle fleet mostly comprising very large crude carriers, sailing with their satellite transponders turned off. The cargo is moved on 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, whereas before the war almost no Gulf crude changed ships in the Gulf of Oman.
However, the recovery in exports from the region remains unbalanced, and supplies of refined products remain constrained. This poses a problem for businesses and households that depend on refined products such as diesel to run their cars, vans and lorries. The average diesel price in the UK hit an all-time high of 199.18p a litre on Monday, with many motorists already reporting prices above £2 on some forecourts.
They recorded a seven-day average of 677,000 bpd of refined products as of Monday, compared with 3.6m before the conflict. Even as oil exports from the region have increased, the level of threat to ships operating around the strait of Hormuz has not disappeared. The danger is assuming that resilience equals security.
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