Hormuz Disruptions Tighten Oil Supply as WTI Holds Steady

The global energy market is facing significant disruptions due to the ongoing conflict in the Middle East. The Hormuz Strait, a critical shipping route for oil exports, has seen a reduction in throughput, forcing Gulf oil producers to rely on alternative routes and dark shipment oil trade. According to the U.S. Energy Information Administration (EIA), the negative impact of Saudi oil production losses on global oil supply has been revised upward, with a projected increase in 2026 and 2027 oil output.

The situation is particularly challenging for Brent and WTI crude oil, with Gulf exports running at around 15 to 16 million barrels per day, two-thirds of pre-war levels. The disruptions have also affected natural gas markets, with LNG exports through the Hormuz Strait expected to be disrupted. However, the EIA's latest report suggests that dry gas production is on track to reach a record 111.7 billion cubic feet a day in 2026, while LNG exports are predicted to hit a record of 17.4 bcfd.

Despite these challenges, natural gas is expected to have a supply cushion for the domestic market, with inventories projected to be approximately 5% higher than the 5-year average going into winter. However, the Hormuz shipping flows remain the dominant near-term energy catalyst, and the outlook for oil prices remains uncertain.