Oil Exports Surpass Pre-War Levels Despite Ongoing Tensions

According to data from maritime tracking agency Kpler, oil exports have recently reached and even exceeded levels seen before the conflict, despite Iran’s increasing attacks on commercial vessels in the Strait of Hormuz.

Kpler noted that total oil flows hit 24.5 million barrels per day (bpd) for the week ending October 18, surpassing the 24.4 million bpd average noted just prior to the start of the U.S.-Israel-Iran conflict in February.

The reported figures include oil transported through alternative routes, such as the Red Sea, which some Gulf producers have been using since Iran began launching drone and missile strikes on ships in Hormuz. However, Kpler’s statistics do not reflect Iranian oil exports, which have nearly ceased due to U.S. sanctions.

Interestingly, Kpler mentioned that vessel traffic in the Strait is still far below what it used to be. In more peaceful times, over a hundred ships would transit the Strait daily, while only about 20 have managed to do so in the last ten days. Many vessels opt to turn off their transponders for safety, complicating efforts to accurately gauge traffic levels.

Iran’s Islamic Revolutionary Guard Corps (IRGC) has claimed that the Strait of Hormuz is “closed,” but U.S. Central Command (CENTCOM) asserts it remains “open.”

CENTCOM reported that about 400 merchant ships traversed the Strait the week before, a figure significantly higher than Kpler’s estimate. The discrepancy likely comes from the ships operating “dark” for safety. The strong overall oil export figures could also highlight the effectiveness of alternative shipping routes.

On Saturday, CENTCOM noted that U.S. forces had “redirected” 138 commercial vessels to enforce the blockade against Iran.

Bloomberg News mentioned that many large tankers have been traveling in convoys through the Strait and transferring oil to other vessels once they safely navigate out of the high-risk area. This practice could also explain the high oil volume with fewer ship transits.

However, analysts pointed out that convoy and ship-to-ship transfers have become more unpredictable than the pre-war era, suggesting that daily oil flow figures might show greater volatility, with noticeable surges in loadings as each convoy moves through.

Another tracking entity, Vortexa, reported lower oil flow figures than Kpler, although their estimate still stood at 18 million barrels a day—just shy of the pre-conflict average.

The International Energy Agency (IEA) highlighted the UAE’s relative success in maintaining oil shipments in light of Iranian threats, likely thanks to its ownership of many tankers. Independent operators are understandably more wary of the Strait, although some do still venture through.

The UAE also features a high-capacity pipeline, the Habshan-Fujairah, designed to bypass the Strait of Hormuz entirely, ensuring safe transit to ports in Oman. Moreover, the UAE is working on a $3 billion upgrade to double the pipeline’s capacity, which is expected to be completed by mid-next year.

Despite the impressive resilience of Middle Eastern oil flows, Bloomberg noted that this has not led to a significant drop in oil prices. Brent crude prices are still above $100 per barrel, partly due to soaring shipping and insurance costs.

The elevated oil prices might explain why some ship owners are willing to face the risks that come with Iranian aggression. Kpler suggested that Iraqi oil prices have surged by about $20 per barrel since the war started, adding a substantial $40 million in extra revenue for a fully loaded tanker. If prices were to fall, however, supply could drop as shipping risks might begin to outweigh the potential profits.

“The big picture is that the system for shipping through a dangerous Strait of Hormuz is now well-established and the risk appetite of those involved in exporting oil has risen,” commented commodities economist Hamad Hussain.

He added that Iran would need to adopt a more aggressive stance to regain its previously held influence over oil flows from the region.

On Tuesday, Iran expanded its blacklist of vessels barred from using the Strait, now including 121 ships.

Reportedly, the U.S. is contemplating a novel approach to boost oil flows through Hormuz by allowing new investors to acquire sanctioned vessels from the “shadow fleet” and convert them for legitimate crude oil transportation.

Many of these ships were previously used by Russia to dodge sanctions imposed after its invasion of Ukraine in 2022. Energy Secretary Chris Wright emphasized that the U.S. would not simply lift sanctions on these vessels but would instead implement an approval process to ensure they don’t revert to smuggling oil for Russia or China.

“We’re relocating some ships from what I call the ‘bad-guy fleet’ to the ‘good-guy fleet.’ They will not transport sanctioned oil anymore,” Wright stated.

“We are converting dark tankers to legitimate tankers. There is no removal of sanctions,” he reiterated.

The “shadow fleet” could represent a significant resource, as experts believe it includes over 1,600 ships. If these ships can change ownership while retaining their crews, they might still have the operational know-how for “running dark” to avoid detection. Wright expressed hopes that dozens or even hundreds of shadow fleet vessels will be enlisted to help enhance global oil supply.