Initial estimations were straightforward: sum up all non-Iranian Gulf crude oil exports, estimated at 12 million to 15 million barrels per day, and it’s clear this is the most significant crisis in history.
As a result, benchmark Brent crude futures surged to nearly $120 per barrel in early March. Analysts cautioned that this was merely the beginning, with forecasts predicting prices could reach $200, raising inflation concerns for consumers and businesses.
Tankers halted operations as Iran’s threats rendered voyages too hazardous, and it became nearly impossible to locate tankers attempting to make deliveries due to U.S. restrictions on satellite imagery over the Gulf and vessels disguising their locations.
MILLIONS OF BARRELS ARE GETTING OUT
Yet, tankers have managed to escape; some have been tracked by shipping firms, while others remain elusive. As more evidence emerges, the market is recalculating these volumes, trying to understand why oil prices have dipped below $90 despite the ongoing Iran conflict, leaving market bulls disoriented.
U.S. President Donald Trump stated on Wednesday that over 100 million barrels had traversed the strait as part of what he termed a covert U.S. operation to assist oil tankers.
Shipping data firm Kpler estimated that approximately 136 million barrels of non-Iranian crude moved through the Hormuz and Gulf of Oman channels between the beginning of April and June 10, translating to roughly 1.9 million barrels daily.
”Following an initial disruption due to the conflict, flows have improved as alternative logistics ramped up,” Kpler commented.
These “alternative logistics” include Iraq, Kuwait, and the UAE exporting substantial amounts of crude in tankers with their satellite systems disabled—sometimes in collaboration with Iran and sometimes independently, according to trading sources.
Such exports contribute to oil flows of about 4 to 5 million barrels per day from Saudi Arabia, which has been shipping from its Red Sea port of Yanbu since March.
SHORTFALL WELL BELOW INITIAL ESTIMATES
The International Energy Agency’s latest report estimated that Gulf supply has declined by 14 million barrels per day, or around 14% of global supply.
However, the actual figure could be closer to 5 to 6 million barrels per day, according to sources from two major trading companies, as producers find ways to keep shipments moving.
Current Iraqi exports are approximately 2.5 to 3.0 million barrels per day below normal, while Kuwait’s exports are reduced by about 1.5 million, and Saudi Arabia and the UAE by around 0.5 million each, based on one source’s calculations.
External factors, such as a rise in U.S. oil exports, a record release of 400 million barrels from international emergency stocks, and reduced Chinese demand have also played a significant role in tempering the oil market.
Taking into account the decrease in Chinese demand, the current market shortfall may be closer to 2 million barrels, one source indicated.
”This suggests that commercial oil markets are adequately supplied for now, given all the adaptations made to the shock,” commented Bjarne Schieldrop of SEB concerning the decline in oil prices since March and April.
FALLING INVENTORIES A LOOMING RISK
Despite the market’s adaptability, these makeshift solutions have their limits, and global oil inventories are diminishing, raising the risk of renewed price spikes.
Stockpiles in the world’s largest economies are on track to reach their lowest levels since at least 2003, experiencing record depletion due to the reduction in Gulf output, according to a report from the U.S. Energy Information Administration released on Tuesday.
U.S. inventories are declining rapidly, currently at 351 million barrels in two key U.S. hubs, as reported by S&P Global Energy. The “danger zone” for these stocks begins around 325 million barrels, the report noted.
”As inventories fall below this threshold, the market becomes more susceptible to logistical issues and price surges,” it added.
(Additional reporting by Seher Dareen and Robert Harvey, editing by Jason Neely)
