Hormuz Oil Surge Sets Stage for Chaotic Rebalancing Act

The Strait of Hormuz oil exports have surged to pre-war levels, but the market is still experiencing chaos as it tries to reboot after a 100-day conflict. The reopening of the waterway has led to a rush of tankers leaving the Gulf, with some vessels disabling tracking systems during transit. However, this influx of oil is not being matched by an increase in inbound tankers needed to load crude sitting in onshore storage.

This dynamic is particularly challenging for producers like Kuwait, Iraq, Bahrain, and Qatar, which have few alternative export routes. According to Rystad Energy, shut-in production across the Gulf fell to 9.6 million bpd by mid-June from 11.7 million bpd three weeks earlier, with the region expected to return to pre-war output by December.

Iran's oil production is also set to ramp up after the US suspended most sanctions restricting Iran's oil exports and sales. Rystad estimates that Iran's oil output could reach 3.3 million bpd by year-end, above pre-conflict levels, if the sanctions relief stays in place.