Middle East oil exports rebound but prices stay high due to logistics crisis

Crude oil exports from the Middle East have surged to their highest level since the outbreak of war in Iran, with Persian Gulf producers resuming shipments through the Strait of Hormuz despite ongoing threats. However, Brent crude prices remain above $100 per barrel, driven by logistical challenges rather than physical supply shortages. According to Reuters and data from Kpler, crude oil flows through the Strait of Hormuz reached a seven-day average of 14.2 million barrels per day on September 26, roughly 80% of pre-war levels. Despite this increase, oil prices continue to trade at elevated levels due to severe bottlenecks in the global energy supply network.

The war has fractured the global oil supply chain, leading to unprecedented tanker freight rates, surging maritime insurance costs, and a severe deficit in refining capacity. These issues have created significant bottlenecks that could take months or years to resolve, meaning consumers may face sustained high energy costs. The Strait of Hormuz, a critical passage, saw Saudi exports average 3 million barrels per day in September, the highest since the conflict began. This rebound highlights the paradox that even under persistent conflict, substantial volumes of crude can continue moving through the strait.

Oil transportation costs have surged out of control, with daily charter rates for Very Large Crude Carriers (VLCCs) reaching $1.2 million per day, up from $30,000 in January. This dramatic increase has transformed freight charges from a minor cost to a primary driver of energy prices. The crisis is further exacerbated by lost refining capacity in the Middle East and Russia, particularly affecting the diesel market. G7's decision to release diesel from strategic stockpiles offers only temporary relief, as it does not address the underlying loss of physical refining capacity.

The complex transport logistics surrounding the Persian Gulf have tied up a large portion of the global VLCC fleet, tightening tanker availability worldwide. As export volumes rise, demand for shipping and transshipment networks increases, potentially worsening the situation. The refining crisis, combined with geopolitical uncertainty, ensures that oil prices will remain elevated for the foreseeable future.