Alternative Supplies and Massive Stockpiles Keep Oil from Sustained Break Above $100
Gulf exporters are using alternative routes and methods, while tankers carrying large volumes of crude oil have managed to pass through the Strait of Hormuz despite mounting tensions.
The price of Brent crude, the global benchmark, rose this month but remained below $100 per barrel despite the latest escalation in the conflict between the United States and Iran, which disrupted exports from Gulf countries through the Strait of Hormuz and the Red Sea. Experts believe that alternative supplies, substantial stockpiles, and declining demand are among the main reasons why prices have remained at relatively manageable levels.
According to Argus, crude oil shipments from Middle Eastern producers currently stand at around 11 million barrels per day, compared with 18 million barrels per day before the outbreak of the Iran war.
Claudio Galimberti, chief economist at Rystad Energy, said that during the week before fighting resumed on August 30, between eight and nine million barrels per day were flowing through the Strait of Hormuz, roughly twice the volume recorded during the previous week.
He added that although flows have since fallen to below two million barrels per day, the daily moving average remains between four and five million barrels, keeping Brent at what he described as a “fair” level of around $95 per barrel. Industry estimates place daily exports between six and eight million barrels.
Data released by Kpler on Monday showed that no very large crude carrier had been observed leaving the Strait of Hormuz since September 2.
During the period of the temporary agreement between the United States and Iran in July, exports through the Strait of Hormuz returned to pre-war levels of 16 million barrels per day.
Gulf producers have found alternative routes and are expected to continue sending shipments through ship-to-ship transfers outside the Strait of Hormuz, helping to ease some of the shortages that had emerged earlier.
Saudi Aramco resumed loading operations from the port of Ras Tanura inside the Gulf in August. However, its exports from Yanbu on the Red Sea remain under pressure due to the maritime blockade imposed by Yemen’s Iran-aligned Houthis. According to preliminary data from Kpler, Yanbu exports fell to a six-month low of 1.429 million barrels per day in August, compared with an average of 3.9 million barrels per day during the previous three months.
Exports from Egypt’s alternative port of Sidi Kerir reached 2.139 million barrels per day in August, more than double the volume recorded in June. Iraqi exports also rebounded in August to around 2.34 million barrels per day. Iraq is the second-largest producer in the Organization of the Petroleum Exporting Countries, OPEC.
According to Kpler data, shipments from the United Arab Emirates remained around 2.9 million barrels per day in July and August after reaching a record high in June.
Kuwaiti crude oil exports recovered to around one million barrels per day in July and August. Iranian exports, however, declined sharply because of the US blockade.
Garand Rystad, founder of Rystad Energy, said that producers outside OPEC, including the United States, Canada, and Guyana, are expected to increase production by a combined 1.4 million barrels per day this year, offsetting part of the shortfall.
Meanwhile, Kpler data showed that Russian crude oil exports remained stable at around 5.5 million barrels per day in July and August, down from a peak of 6.4 million barrels per day in June. They nevertheless remained 23 percent higher than in February, as refining activity at Russian refineries declined due to damage inflicted on facilities by Ukrainian attacks.
Russia has nevertheless lowered its oil production forecast for 2026 to its lowest level in 17 years, which could result in a decline in its exports.
The decline in demand for petrochemicals and transportation fuels remains significant in the third quarter, at 3.5 million barrels per day, compared with 4.5 million barrels per day in the second quarter. According to Rystad, China accounts for more than half of this decline because of the growing use of electric vehicles in transportation and the chemical sector’s increased reliance on coal.
China, the world’s largest oil importer, reduced its seaborne crude shipments to seven million barrels per day in July and August, down from more than 11 million barrels per day in February.
Beijing’s enormous reserves, estimated by Kpler at around 1.17 billion barrels, have also helped reassure markets.
Data showed that spot market premiums rebounded to levels seen in April. Dubai and Oman crude premiums ranged between $19 and $20 per barrel above Dubai benchmark prices for cargoes scheduled for loading in November. Oman crude futures reached $104.54 per barrel on Monday, while Dubai crude traded at $105.10 per barrel on the spot market.
David Fyfe, chief economist at Argus, said: “For now, this indicates that the physical market is experiencing a very severe deficit.”
He added: “Prices have already moved significantly above $100 per barrel, and, more importantly, the diesel market is experiencing an acute shortage.”
The latest escalation between the United States and Iran is expected to further curb exports from Gulf countries at a time when demand is rising, as refineries increase diesel production. Diesel prices have reached record levels in the United States.
Several banks have raised their Brent price forecasts, including Morgan Stanley, which now expects prices to average $100 per barrel in the fourth quarter.
Goldman Sachs raised its forecasts for Brent and West Texas Intermediate by $5 per barrel for December 2026 and for 2027. The bank attributed the revision to its expectation that shipping disruptions in the Middle East will continue into next year.
Goldman Sachs now expects Brent to reach $85 per barrel and West Texas Intermediate $80 per barrel in December 2026, before falling to $80 and $75 per barrel, respectively, in 2027.
