“Nobody has experienced this kind of disruption,” said Matt Stanley, head of market engagement at commodity intelligence and ship-tracking firm Kpler. The reason the numbers are so hard to identify is because of what the industry calls black trading – ships sailing without their AIS transponders, sailing close to the Omani border at night, sometimes with naval escort.
However, there are ways to detect traces of leaking oil. Different grades of crude oil may originate only from specific regions. The UAE’s Murban crude can be exported out of the strait via Fujairah. Another type of crude, Upper Zakum, cannot do this. An oil market analyst said his team had seen Upper Zakum crude appear in other markets. Those scenes are happening, yet the scale remains unknown.
Stanley says it’s possible that 100 million barrels may have come through the Strait of Hormuz since May 1st. “When you put that into context, pre-conflict, it was about 20 million barrels per day equivalent to five days’ worth of oil in a normal traffic environment, and it takes more than a month. 100 million barrels, that’s a good number, but compared to past traffic, that’s literally a relative drop in the ocean.”
Why haven’t prices increased yet?
The world’s most important oil chokepoint has been effectively closed for more than 100 days. World Trade Organization data shows a 95 percent drop in crude oil shipments and a 99 percent drop in liquefied natural gas carriers from Arabian Gulf ports. The International Energy Agency called it “the largest supply disruption in the history of the global oil market.” Yet Brent crude is at $87.55 a barrel – the lowest it has been since the conflict began.
This is because of buffers. Stanley says China has about 1.3 billion barrels of storage, which is being reduced by about a million barrels a day. “We see their demand, about 7 million barrels per day from May, June and July. They were buying 12.5 million barrels per day in December.” The US, Brazil and Canada have also stepped in to fill part of the void.
The three analysts interviewed agreed that the oil market reaction has been strong. “The oil market responded quite well to this outage in terms of cutting parts of the demand,” says Iman Nasseri, managing director for the Middle East at energy and chemical consultancy FGE NexentECA. “Large amounts of stock have also come into the market, but we doubt they will continue to do so. We expect that by July [if the strait remains closed]“Things will change.”
Buffers will be exhausted. One analyst said stocks are approaching what the industry calls operationally critical levels – where oil in storage and excess supplies need to be replenished. He said the US, currently acting as a swing producer, will face its own deadlines as the end of the year approaches, and the US will have to prioritize its own domestic production to accommodate people who need to heat their homes.
“For people who are looking at October, you really think this will be sorted out by the middle of August,” says Stanley. “I think that’s what the market is expecting.”
back online
Global oil supply fell by 10.1 million barrels per day in March, with OPEC+ production falling by 9.4 million barrels per day month-on-month. The tough question is how much comes back, and when.
S&P Global CERA analysis suggests a reopening timeline of 10 weeks to seven months for sectors that have been closed for two months. IEA Executive Director Fatih Birol has said that more than 80 energy facilities have been damaged, and recovery “could take up to two years.” The UAE’s national oil company estimates that full Hormuz flows will not resume until 2027.
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