Gulf Oil Exports Rebound but Iran Loses Critical Lifeline

Gulf oil producers, including Saudi Arabia and the UAE, have significantly rebounded their crude oil exports following disruptions caused by the Iran war. According to The Kobeissi Letter, exports surpassed 14 million barrels per day (mbd) last week, marking a 210% increase from the low of around 4.5 mbd in March. This recovery has been facilitated by the US military securing parts of the Strait of Hormuz and establishing protected shipping corridors.

Despite the recovery, the oil trade has not returned to normal. Producers are relying more on pipelines, tanker transfers, and shuttle operations to bypass the Strait of Hormuz. For instance, Saudi Arabia's East-West pipeline was recently damaged by a drone strike, leading to increased loadings from the Red Sea port of Yanbu. Around 40% of Gulf crude is now exported without crossing the Strait, up from 17% before the war.

In contrast, Iran's oil exports have collapsed under the US naval blockade, severely impacting Tehran's revenue. Meanwhile, the recovery in crude exports has not fully translated into refined fuels, with shipments of gasoline, diesel, and jet fuel remaining at about 50% of pre-war levels. This imbalance is contributing to continued pressure on global fuel markets, particularly in the United States, where high diesel prices are sparking political pressure.