Oil Prices Lag Despite Strait Disruptions as Alternative Routes Ease Shortfall

Oil prices remain below $100 despite disruptions in the Strait of Hormuz and the Red Sea due to the ongoing U.S.-Iran conflict. Rystad Energy's Chief Economist Claudio Galimberti estimates that flows through Hormuz have fallen to below 2 million bpd, but the daily moving average is still around 4 million to 5 million barrels.

Despite this, oil prices are considered 'fair' at $95 a barrel, according to Galimberti. Industry estimates put daily exports between 6 million and 8 million barrels. Gulf producers have found alternative routes to mitigate some of the earlier shortfall.

Saudi Aramco resumed loadings from its Ras Tanura port in August, while exports from Egypt's Sidi Kerir hit a record high in August. Non-OPEC producers such as the U.S., Canada, and Guyana are set to increase output by 1.4 million bpd this year.

Russian crude exports held steady at about 5.5 million bpd in July and August, but Russia has downgraded its 2026 oil output forecast to a 17-year low. Demand destruction remains significant in the third quarter at 3.5 million bpd, with China accounting for more than half.

Spot premiums have rebounded to April levels, indicating physically tight markets. Several banks have raised their Brent price forecasts, including Morgan Stanley which expects prices averaging $100 a barrel in the fourth quarter.