Key Takeaways
- Global oil benchmark Brent crude has stayed below $100 a barrel despite US-Iran conflict.
- Alternative shipping routes have mitigated supply disruptions in the Gulf.
- Non-OPEC producers are stepping up output to fill the gap.
Global oil benchmark Brent crude has remained below $100 a barrel despite recent escalation in the US-Iran conflict, which has disrupted Gulf exports from the Strait of Hormuz and the Red Sea. Despite the tensions, the price has not risen significantly, according to industry analysts.
Claudio Galimberti, Chief Economist at Rystad Energy, noted that significant volumes have been able to flow through the Strait of Hormuz, with a daily moving average of around 4 million barrels, putting Brent at a 'fair' price of $95. However, the daily exports through Hormuz have fallen to below 2 million barrels since the conflict began, Kpler data showed.
Alternative shipping routes have helped mitigate some of the earlier shortfall. Saudi Aramco resumed loadings from its Ras Tanura port inside the Gulf in August, although its exports from Yanbu in the Red Sea remain under pressure from a naval blockade by the Yemeni Houthis. Exports from the alternative port of Egypt’s Sidi Kerir hit 2.14 million barrels per day in August, more than double June volumes.
Iraq’s exports rebounded in August to around 2.34 million barrels per day, while shipments from the United Arab Emirates (UAE) hovered around 2.9 million barrels per day in August and July after hitting a record in June. Kuwaiti crude exports have recovered to about 1 million barrels per day in July and August.
However, Iran’s oil exports have fallen sharply due to the US blockade. Non-OPEC producers, including the US, Canada, and Guyana, are set to increase output by a combined 1.4 million barrels per day this year, according to Jarand Rystad, founder of Rystad Energy, partly filling the gap left by the disruption.
Meanwhile, Russian crude exports have held steady at about 5.5 million barrels per day in July and August, down from the 6.4 million barrels per day peak in June, but still 23 per cent higher than February as processing at Russian refineries has fallen due to damage from Ukrainian attacks, Kpler data showed.
Industry estimates put daily exports between 6 million and 8 million barrels, with no visible very large crude carrier exiting the strait since September 2. During the interim US-Iran peace deal in July, Hormuz exports touched pre-war levels of 16 million barrels per day.
Despite the supply disruptions, demand destruction in petrochemicals and transportation fuels remains significant in the third quarter at 3.5 million barrels per day, versus 4.5 million barrels per day in the second quarter, according to industry reports.
