Standard Chartered announced that oil and gas condensate exports from the Gulf are gradually approaching pre-war volumes despite existing challenges. In September 2023, the volume of oil and gas condensate exports from this region reached approximately 16.5 million barrels per day (bpd), indicating a significant recovery in this sector.
Status of the Strait of Hormuz and Export Trends
However, only 60 percent of this export volume has passed through the Strait of Hormuz, showing a significant decrease from 83 percent before the war. This statistic indicates serious challenges in the oil and gas condensate export route from this region. According to Standard Chartered, these conditions reflect the resilience of exporters, as they have managed to transport oil, but this is done less efficiently and at significantly higher costs.
Read more: API Calls for Accelerating Energy Licensing Reforms in the U.S. Congress
Use of Alternative Methods and Logistical Challenges
Currently, export systems have been forced to use more complex methods, especially ship-to-ship (STS) transfer, which heavily depends on the number of vessels. Shuttle tankers are increasingly transporting crude oil through the Strait of Hormuz and then transferring it to larger ships in the Gulf of Oman. Additionally, exporters are increasingly utilizing pipelines and ports that bypass the Strait. The southern route along the coast of Oman has become an important route for shuttle vessels.
Standard Chartered also noted that STS capacity appears to be saturated and vessel utilization remains inefficient. Travel times for vessels have increased, and transportation and security costs remain high. This situation is particularly pronounced for Saudi Arabia, which is recognized as one of the main oil exporters in the region.
Impacts on Saudi Exports
Saudi Arabia exemplifies the successes and limitations of this adaptation. Following damage to the east-west pipeline in early September, exports were significantly shifted towards the eastern coast. Standard Chartered estimates that total Saudi exports in September reached approximately 6.9 million barrels per day, up from 2.45 million barrels per day in August. Additionally, 19 VLCC tankers have passed through the Strait of Hormuz in the past week.
The revival of the east-west pipeline and Yanbu loadings has returned another export route to the market and reduced the immediate risk of production stoppages, although pipeline throughput is still below nominal capacity and remains at risk of further attacks. These alternative methods also come with high costs, and reports indicate discounts of up to $9 per barrel for shipments loaded on the shores of Oman to compensate for additional logistical costs.
Future Implications and Oil Prices
Improvements in physical oil flows reduce the likelihood of more severe crises and should gradually eliminate part of the supply shortage premium in oil prices. However, these shipments are accompanied by higher costs, longer travel times, and increased tanker utilization, with less excess capacity in the logistics system. Standard Chartered has stated that this improvement, given the markets seeking to recover from severe physical supply losses, is undesirable relative to price reductions and does not justify a return to pre-war risk premiums.
Ultimately, the tactical success of Gulf exporters has also altered regional dynamics. Maritime oil exports from Iran have dropped to near zero in September, while they were about 1.7 million barrels per day before the war. This is due to the severe blockage of Tehran's ability to transport oil through the Strait of Hormuz. Iran's ability to exploit this situation is gradually diminishing, although this raises the risk of unpredictable military escalation.
Read more: Natural Gas Prices in November Rise Above $3 · Increase in Middle East Oil Exports and Its Impact on Iran's Situation
