Last week, Mr. President Donald Trump claimed that a secret US mission transported 100 million barrels of oil through the Strait of Hormuz while it was blocked. The claim comes to an industry already preoccupied with the question of how much oil is actually being extracted – and as it turns out, no one can answer that question with certainty.
“No one has experienced this type of disruption,” said Matt Stanley, director of market engagement at Kpler, a cargo intelligence and ship tracking company. The numbers are so tough to pin down because the industry calls it “dark trade” – ships sailing without AIS transponders turned on, moving closer to the border with Oman at night, sometimes under naval escort.
Either way, there are ways to detect some of the oil leaking out. Different grades of oil can only come from specific deposits. The UAE’s Murban crude can be exported through Fujairah, out of the strait. Another type of oil, Upper Zakum, cannot. One oil analyst noted that his team had seen Upper Zakum crude appear in other markets. Such observations are taking place, but the scale remains unknown.
Stanley says it’s possible that 100 million barrels have passed through the Strait of Hormuz since May 1. “If we take into account the context, before the conflict, about 20 million barrels a day were flowing, which is five days’ worth of fuel in normal traffic, and it took over a month. 100 million barrels is a good number, but it is a relative drop in the ocean, literally, compared to the previous movement.”
Why prices haven’t exploded yet
The world’s most significant oil chokepoint was effectively closed for over 100 days. Data from the World Trade Organization show a 95 percent reduction in crude oil shipments from Persian Gulf ports and a 99 percent reduction in liquefied natural gas shipments. The International Energy Agency has he called it “the largest supply disruption in the history of the global oil market.” However, the price of Brent crude oil is $87.55 per barrel – the lowest level since the conflict began.
This happens because of buffers. China has about 1.3 billion barrels in storage, drawing it up to about a million barrels a day, Stanley says. “We see their demand, about 7 million barrels a day from May, June and July. In December, they bought 12.5 million barrels a day. ” To partially fill the gap, the United States, Brazil and Canada also stepped in.
Three analysts interviewed agree that the oil market reaction has been overwhelming. “The oil market has responded significantly well to this outage, reducing some of the demand,” says Iman Nasseri, managing director for the Middle East of FGE NexantECA, an energy and chemicals consultancy. “There has also been a significant amount of merchandise on the market, but we doubt they will continue to do so. We expect until July [if the strait remains closed]everything will change.”
The buffers will run out. One analyst said inventories are approaching what the industry calls operationally critical levels, requiring a replenishment of stored oil and additional supplies. They added that the United States, which currently serves as swing manufacturer, faces its own deadline as the end of the year approaches and will need to prioritize its own domestic production to meet the needs of people needing to heat their homes.
“People who look at October really think everything will be sorted out by mid-August,” Stanley says. “I think that’s what the market is counting on.”
Back to the Internet
Global oil supplies cut in March, production amounted to 10.1 million barrels per day, with OPEC+ production decreasing by 9.4 million barrels per day on a monthly basis. The more tough question is how much will come back and when.
An analysis by S&P Global CERA estimates that the timelines for restarting fields range from 10 weeks to seven months for fields closed for two months. IEA Executive Director Fatih Birol he said more than 80 energy facilities were damaged and reconstruction “could take up to two years.” The United Arab Emirates’ national oil company estimates that full flow of the Hormuz will not resume until 2027.