Hormuz Constriction and Saudi Pipeline Outage Spark Global Oil Supply Risks
The global oil supply is facing unprecedented risks due to two critical export routes being impaired. The Strait of Hormuz, which carries one-fifth of global oil supplies, has seen a significant reduction in ship traffic, with only around 10 ships per day crossing the strait compared to a 10-day average of 14 ships previously. Additionally, Saudi Arabia's pipeline outage is adding to the supply risks.
The International Energy Agency (IEA) has drastically reduced its estimates for global production in 2026 by 5.7 million barrels per day (mb/d), mainly due to persistently low supply from the Gulf region. This reduction is a result of the ongoing tensions and disruptions in the oil-rich countries.
On the other hand, natural gas fundamentals are more balanced, with US production averaging 113.4 billion cubic feet per day (bcfd) as of September, slightly lower than previous weeks but offset by strengthening LNG feedgas demand. The disruptions to exporting Qatar and the UAE have removed around 36 million tonnes of LNG from the market in 2021, making US LNG a crucial replacement.