Hormuz Oil Flows Are Near Prewar Levels. Consumers Are Unlikely To See Relief Soon.
Crude oil is once again moving through the Strait of Hormuz at rates approaching prewar levels. But the rebound in shipments is not delivering the sharp drop in oil, gasoline, and diesel prices consumers might expect.
Ship-tracking data shows a significant recovery in crude flows through Hormuz. According to The Washington Post, Kpler estimated that nearly 12.5 million barrels per day moved through the strait during the week ending September 27, about 1 million barrels below its prewar baseline. Windward, another ship-tracking platform, put the figure closer to 10 million barrels per day.
The recovery has been aided by Iran’s diminished military capabilities and a major U.S. Navy operation that has helped secure portions of the waterway for shipping. “This is not trivial,” Windward co-founder and CEO Ami Daniel said. “The U.S. military has done a fantastic job facilitating consistent shipments.”
Yet Brent crude, the international benchmark, saw its prices remain about 40% higher than when the Iran war began in February. U.S. consumers are also continuing to face steep prices at the pump, with regular gasoline averaging $4.46 per gallon and diesel at $6.44.
The reason is that months of disruptions have created shortages that cannot be erased simply by restoring crude shipments. “The market realizes that,” Bob McNally, founder of Rapidan Energy Group, said. “We have dug ourselves into a deep deficit over the last several months and this only reduces it. It does not get us back to where we were.”
Oil inventories have been depleted and now need to be replenished. At the same time, refining infrastructure across the Middle East has been damaged, restricting the region’s ability to turn crude oil into the fuels consumers and businesses actually need.
The strain on supplies is also forcing Washington to continue tapping emergency reserves. The U.S. Department of Energy announced Tuesday that it would release another 40 million barrels from the Strategic Petroleum Reserve, which is already at its lowest level since 1983. “We have dug ourselves into a big hole,” Finley said. There is another complication. Even the recovery in crude shipments through Hormuz remains fragile.
Most of the crude still being blocked is believed to be Iranian, as the United States seeks to limit Tehran’s oil revenue and its ability to finance military operations. Non-Iranian shipments, meanwhile, continue to fluctuate sharply, with some September days seeing only a few million barrels pass through the strait. Maintaining higher flows also depends on expensive U.S. military protection and shipping workarounds that could quickly be disrupted by renewed Iranian attacks.
Iran has also shifted some of its attacks away from Hormuz and toward oil infrastructure on land. A recent attack disabled Saudi Arabia’s strategically important East-West pipeline, which had been transporting roughly 7 million barrels of crude per day. The pipeline has been only partially restored and remains vulnerable to additional attacks.
