Key facts
- Crude oil prices continued to climb, with Brent crude trading at $107.37 and WTI at $94.31 per barrel.
- Reports suggest daily oil flows out of the Strait of Hormuz reached 12.8 million barrels.
- Ship-to-ship transfers are being used to circumvent disruptions.
- These alternative export methods are less efficient and more costly.
- Record high tanker rates are adding to export costs.
- Maritime traffic is being rerouted around the Cape of Good Hope, lengthening journeys.
Crude oil prices extended their rally, with Brent crude trading at $107.37 per barrel and West Texas Intermediate at $94.31 per barrel. This upward momentum persists despite reports indicating a significant increase in oil flows through the Strait of Hormuz since the beginning of September, with Kpler estimating daily exports at 12.8 million barrels.
The widening price gap between Brent and WTI is attributed to potential U.S. restrictions on diesel fuel exports. While tanker tracking data initially suggested crippled traffic, Kpler's estimates account for vessels operating in 'dark mode' or utilizing ship-to-ship transfers. Saudi Arabia has adopted these methods following Houthi attacks on energy infrastructure, which have increased the cost and reduced the efficiency of moving crude out of the Persian Gulf.
"A clearer picture is emerging of higher oil export volumes leaving the Gulf, but much of that increase still relies on workarounds such as ship-to-ship transfers. Those methods are less efficient and more costly than normal operations, which is why crude prices remain elevated," said Tim Waterer from KCM Trade, as quoted by Reuters.
Adding to the cost burden and tightening vessel availability are record-high tanker rates. Furthermore, maritime traffic is increasingly rerouted from the Red Sea to the Cape of Good Hope, extending journey times for tankers.