Crude oil exports from strait of Hormuz largely return to pre-war levels

Exports of crude from the Strait of Hormuz have largely returned to levels seen before the outbreak of the Iran-war" class="entity-link entity-event" data-entity-id="38748" data-entity-type="event">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" class="entity-link entity-event" data-entity-id="38748" data-entity-type="event">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.Tankers and merchant vessels anchor off Fujairah. Ship-to-ship transfers are among the methods being used to transport oil. Photograph: Barry Iverson/AlamyMore 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.“Diesel carries the sharpest risk,” said Kpler analysts, who found that less than 20% of pre-war levels of refined products shipped through Hormuz were being transported.skip past newsletter promotionafter newsletter promotionThe average diesel price in the UK hit an all-time high of 199.18p a litre on Monday. Photograph: Jacob King/PAThey 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.“New routes emerge, cargos are rerouted, risk is priced in and absorbed. The danger is assuming that resilience equals security. It doesn’t,” said Richard Meade, the editor in chief of shipping publication Lloyd’s List. “Oil flows have recovered because the market participants have accepted greater operational complexity and higher costs. The underlying threat remains.”The danger to vessels and their crew was highlighted on Tuesday, when three Liberian-flagged tankers were hit by projectiles while transiting the strait.The price of crude remains at elevated levels and moved higher again on Thursday, as traders balanced the recovery in some Middle East exports with uncertainty over a long-term solution to the conflict and reopening of the strait.The price of Brent crude briefly was back above $100 a barrel on Thursday, up 3% to $101.The rise came after reports that China had suspended exports of oil products to regions beyond Hong Kong and Macau, a move that would add further pressure to oil markets. Oil analysts said China’s decision could suggest it was concerned about the availability of domestic products.