Gulf Producers Find Creative Ways to Keep Oil Flowing Amid Iran-US War
The Iran-US war has been ongoing for nearly seven months, but despite fears of skyrocketing oil prices and economic collapse, the global oil market remains relatively stable. This is thanks to a complex web of alternative routes and workarounds found by Saudi Arabia and other Gulf producers.
When Iran shut down the Strait of Hormuz at the start of the war, it choked off sea passage for 15 million barrels of oil per day. However, the Saudis quickly turned to their East-West pipeline that carries oil to their Red Sea port of Yanbu. From there, tankers headed out through the Bab el-Mandeb Strait toward Asia.
Other Gulf producers also found alternative routes. The UAE used its pipeline cutting across neighboring Oman to Fujairah, a route that skirts the strait. Meanwhile, some oil leaked out of the Strait of Hormuz, and ship operators began taking advantage of a U.S.-supervised route near Oman, defying Iran's demands to use its own vetted route.
The workarounds are time-consuming and expensive, with sending oil to Asia through the Suez Canal adding as much as a month to the voyage. The demand for supertankers has sent charter rates skyrocketing, with spot charter rates for Hormuz transits reaching $1 million per day on September 11.
Despite these challenges, analysts estimate that some 6-8 million barrels of oil per day have been restored through the southern route and pipeline to Fujairah. However, this still leaves a deficit of around 7 million barrels per day from pre-war flows.