Rising Persian Gulf Exports Fail to Lower Oil Prices

Crude oil exports from the Persian Gulf have rebounded to about 80% of pre-war levels, yet prices remain near $100 a barrel. Last week, exports surpassed 14 million barrels a day for the first time since the Iran war began on February 28, according to The Kobeissi Letter. This volume is more than 210% higher than the low of 4.5 million barrels in March. The U.S. military played a key role in securing the Strait of Hormuz and opening a two-way corridor along Oman’s coast.

Despite the increase in crude exports, refined fuels like gasoline, diesel, and jet fuel are still only at 50% of pre-war levels. Some Gulf refineries damaged by the conflict have not fully restarted, limiting supply. Meanwhile, hostilities have escalated, with seven strikes on vessels near the strait’s narrowest point since September 28, according to the Wall Street Journal. The Islamic Revolutionary Guard Corps navy warned ships to avoid the U.S.-backed route.

The cost of restoring supply remains high. Ship-to-ship transfers off Oman may have reached 7 million barrels a day in September, adding $30 to $40 to every incremental barrel, according to former Bridgewater economist Bob Elliot. Longer voyages and higher insurance premiums have further increased costs. HSBC analyst Kim Fustier noted that while Middle East crude exports are rising, the cost is enormous.

Looking ahead, futures markets suggest some relief. Dated Brent trades in the $120s, while futures price crude in the $80s by next spring. Elliot attributes this to hedging and supports a roll-sensitive strategic position. He believes blockades are eventually overcome by ingenuity, though at a significant price. With an inventory squeeze now less likely, much of the upside in oil prices may already be in the past.