Crude exports from Gulf oil producers recovered last month to near prewar levels, but Iran has resumed attacks on vessels around the Strait of Hormuz, threatening both shipments and global oil prices.
The Wall Street Journal reported on the 4th, citing data from ship-tracking firm Kpler, that crude exports from the Middle East excluding Iran averaged at least 16.5 million barrels a day from the 1st through the 28th of last month. That is about 87% of the nearly 19 million barrels a day shipped before the war broke out in February.
Standard Chartered estimated that total exports from Saudi Arabia, the Middle East's largest oil producer, rebounded sharply to 6.9 million barrels a day in September from 2.45 million barrels a day in August.
The swift recovery in shipments has been attributed to U.S. Navy escort operations and a series of preemptive strikes that disabled Iranian data and communications facilities along the strait. Shuttle operations introduced by producers including the United Arab Emirates also played a role. Under that arrangement, tankers load crude inside the Persian Gulf, sail out through the strait and transfer the cargo to other vessels waiting outside.
The cost burden, however, is heavy. Ship brokers said Gulf producers are paying $30 million to $40 million per shuttle run through the strait, or $15 to $20 a barrel, excluding insurance premiums. Rory Johnston, founder of oil research firm Commodity Context, said the recent pace of shipments is impressive but by no means sustainable, and has come at an enormous cost.
Meanwhile, attacks on ships are increasing again. The United Kingdom Maritime Trade Operations said it had received reports of seven attacks on vessels near the strait since the 28th of last month, all of them close to its narrowest section. UKMTO said on the 4th that another vessel had been attacked, without disclosing when the incident occurred.
The naval arm of Iran's Islamic Revolutionary Guard Corps warned on the 3rd that ships attempting to transit the strait with U.S. support could come under fire. A radio message obtained by the Journal warned vessels not to trust the U.S. Navy and never to use the southern passage.
Analysts say the renewed attacks may already be having an effect. Johnston said signs of a decline had emerged in recent days, with preliminary tallies pointing to a drop of 2 million to 3 million barrels a day in shipments.
One U.S. government official said Iran's capacity to attack shipping had improved over the past several weeks, raising the risk in the strait. The official said Washington had warned weeks earlier that it would strike Iranian tankers in response to Iranian provocations, but shelved the plan after Iran launched a barrage of missiles at a U.S. Air Force base in Jordan.
The Journal said the attacks expose the fragility of the recovery in shipments, and that fresh disruptions would hit a global economy already strained by high oil prices and interest rate increases. The fact that global oil prices remain near $100 a barrel even after Middle East exports recovered reflects market concerns that shipments will shrink again if attacks resume and that freight and security costs will stay elevated, according to the analysis.
Hamad Hussain, senior economist at Capital Economics, said the widening attacks on shipping show how fragile the current balance in the oil market is, especially if conditions deteriorate further and energy infrastructure is targeted. He expects Brent crude to hold around $100 a barrel through the end of the year. Brent closed at $102.25 a barrel on the 2nd, up about 5% for the week.
