Oil Shipments Surge Despite Ongoing Attacks in the Strait of Hormuz

As missile and drone attacks on commercial vessels continue in Iran's Strait of Hormuz, oil shipments from the Persian Gulf have surpassed pre-war levels. Thanks to the transit system established under U.S. protection, alternative pipelines, and ship-to-ship oil transfers, daily exports have exceeded 24 million barrels. However, the recovery in tanker traffic does not mean that maritime transportation has returned to normal. Increasing attacks, record freight rates, and war risk insurance continue to put pressure on global oil trade.

According to the latest data from maritime data and analytics company Kpler, regional oil shipments via the Strait of Hormuz and alternative routes exceeded an average of 24 million barrels per day in the week ending October 18. This surpasses the pre-war level of 23.3 million barrels.

A study published by The Wall Street Journal on October 21 noted that despite ongoing attacks from Iran, the new transportation system developed by oil producers and tanker operators has been decisive in the recovery of exports.

Oil passing through Hormuz reached 14 million barrels.

Kpler's preliminary data shows that the amount of oil transported via the Strait of Hormuz and dispatched through offshore transfers in the Gulf of Oman has reached approximately 14 million barrels per day. This amount corresponds to 82% of the pre-war level.

Although ship transits through the strait continue to carry high risks due to Iran's missile and drone attacks, tanker movements under the supervision of the U.S. Navy ensure the continuity of oil flow.

However, a significant portion of shipments in the region is no longer conducted through traditional maritime routes. Saudi Arabia and the United Arab Emirates are redirecting oil to terminals in the Red Sea and the Gulf of Oman via alternative pipelines.

According to Kpler's research, prior to the war, 83% of crude oil in the region passed through the Strait of Hormuz, while in September, approximately 40% of regional exports, excluding Iran, were conducted without using the strait.

Tankers are now transferring oil at sea.

One of the most notable aspects of the new transportation arrangement in the Gulf is the shuttle operations of tankers carrying oil over short distances.

In this system, tankers transport crude oil loaded at Gulf ports through the Strait of Hormuz to the Gulf of Oman. The oil is then transferred from ship to ship off the coasts of Fujairah and Sohar to tankers that will make long-distance voyages.

According to Kpler data, more than 70% of the crude oil passing through Hormuz in August was transferred to other tankers at sea.

VLCC-type large crude oil tankers are particularly used in these operations. Some vessels are reported to operate within the Gulf on cycles of approximately 16 days.

This practice ensures the delivery of oil to international markets while reducing the efficiency of tanker usage and increasing transportation costs.

Transportation costs in oil shipping have skyrocketed.

Despite the recovery in oil exports, the rise in tanker freight rates and war risk insurance is putting refiners in Asia in a difficult position.

According to an analysis by Reuters dated October 19, the freight and insurance costs, which normally account for 3% to 7% of the delivery cost of crude oil, have risen to as much as 30% in some shipments.

In October, the average gross refining margin for Asian refiners was around $40 per barrel, but when freight costs were deducted, this figure remained just above $7.

Due to high transportation costs, some Middle Eastern oil producers have had to offer discounts of up to $30 per barrel to their Asian customers.

Reuters reported that the increase in oil exports from the Gulf has not equally reflected in refiners' profitability and that transportation costs have started to pressure producers' revenues.

Attacks on 18 vessels in two weeks.

As oil traffic in the Strait of Hormuz increases, attacks on commercial vessels continue.

In a news report dated October 21, Reuters stated that based on Kpler data, 18 vessels have been attacked in the region over the past two weeks. The threat of attacks has reportedly spread beyond the Strait of Hormuz to the Gulf of Oman.

Previous reports published by maritime intelligence company Marisks also highlighted that the increase in tanker traffic has raised the security risks faced by vessels.

On October 1, the VLCC-type tanker Kazimah III experienced a fire after being hit by an object in the Strait of Hormuz, and on October 4, the Liberia-flagged tanker Lipsi sustained damage to its engine room in an attack.

It was reported that the crews of both vessels survived the attacks.

Brent crude oil surpassed $110.

The return of oil shipments in the Gulf to pre-war levels has not been enough to halt the rise in international oil prices.

On October 21, the price of Brent crude oil per barrel rose above $110, approaching its highest levels in nearly five months. Meanwhile, U.S. West Texas Intermediate (WTI) crude was trading around $99.

According to Reuters, the security risks in the Strait of Hormuz, attacks on Saudi Arabia, and declining oil stocks in the U.S. have contributed to the rise in prices.

Developments in the oil market indicate that the recovery in export volumes alone is not sufficient to lower prices.

Oil flow has recovered, but risks in shipping persist.

In an assessment published on October 1, Kpler stated that a comprehensive political agreement is no longer the only option for the transportation in the Strait of Hormuz to fully return to normal.

According to the company, oil producers, tanker operators, and logistics organizations have developed a new operational model that allows them to continue their activities in the ongoing conflict environment.

However, the long-term sustainability of this system remains uncertain. In particular, shipments of refined oil products and LNG lag behind the recovery in crude oil exports.

Kpler predicts that despite the improvement in oil flow, the security threat in Hormuz will continue to keep freight costs high and that full normalization in transportation will take time.

Thus, a new picture emerges in oil trade in the Gulf: While export volumes exceed pre-war levels, the security risks faced by tankers and transportation costs remain high.

Source: SeaNews Türkiye