When Iran shut down the Strait of Hormuz at the start of the war, choking off sea passage for some 15 million barrels of oil a day, many feared that prices would skyrocket, cratering the world economy.
asserted
prices → shut → economy
Instead, nearly seven months on, oil is expensive but not exorbitant, and analysts say the supply is pretty much sufficient to meet current global needs, even as the higher prices cause political problems for U.S. President Donald Trump and others.
asserted
prices → say → Trump
That's because Saudi Arabia and other Gulf producers quickly found alternative routes and reached for unused pipeline capacity.
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Arabia → find → capacity
When Iran and its militant allies targeted those, the oil exporters and the U.S. military found others — workarounds for the workarounds — in an often clandestine game of whack-a-mole.
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exporters → target → whack
With oil now at around $100 a barrel — higher than before the war but not as bad as feared — Iran has diminished leverage, while a U.S. naval blockade and tightened sanctions smother its own economy.
But the workarounds are expensive and may not be sustainable.
uncertain
workarounds → fear → economy
The drawing down of existing commercial oil stocks — especially by China — has also helped keep prices in check, but cannot continue indefinitely.
asserted
drawing → exist → check
And Iran could yet gain an edge with continued attacks on key oil facilities.
uncertain
Iran → gain → facilities
Pipeline backups were ready
Iran began attacking ships in the Strait of Hormuz in response to the U.S.-Israeli bombardment that started the war.
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that → begin → war
In response, the Saudis turned to their East-West pipeline that carries oil to their Red Sea port of Yanbu.
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that → turn → Yanbu
From there, tankers headed out through the Bab el-Mandeb Strait toward Asia.
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tankers → head → Asia
Likewise, the United Arab Emirates used its pipeline cutting across neighboring Oman to Fujairah — a route that skirts the strait.
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that → use → strait
Both pipelines had spare capacity, and the UAE's state oil company ADNOC and Saudi Aramco used it to keep exports from collapsing completely during the first weeks of the war.
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company → have → war
Meanwhile, some oil leaked out of the Strait of Hormuz.
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oil → leak → Hormuz
In May, ship operators willing to risk Iranian attack started taking advantage of a U.S.-supervised route near Oman, defying Iran's demands to use its own vetted route.
uncertain
operators → risk → route
They shuttled back and forth at night with location systems and mobile phones turned off, and offloaded to tankers waiting outside the strait.
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systems → shuttle → strait
Flows from Kuwait, Iraq, and the UAE started to rise again.
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Flows → start → Kuwait
But Iranian-backed Houthi rebels in Yemen disrupted the Yanbu workaround in July by declaring a blockade of Saudi oil shipments, threatening the Bab el-Mandeb — a repeat of the Hormuz disruption.
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rebels → back → disruption
In response, the Saudis redirected Asia shipments northwest to the Mediterranean, either through the Suez Canal or — for tankers too big to use it — a pipeline across Egypt to another tanker.
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Saudis → redirect → tanker
The oil then made a huge detour as it was shipped around Africa and back to Asia.
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it → make → Asia
Then the East-West pipeline was attacked earlier this month and forced to shut down, potentially for weeks.
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pipeline → attack → weeks
The Saudis shift to the US-protected dark shuttle through Hormuz
With oil loading halted at Yanbu from Sept. 11, the Saudis shifted again, joining other Gulf producers sending oil through the U.S.-guided corridor in the Strait of Hormuz.
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Saudis → shift → Hormuz
On Monday, six supertankers loaded 12 million barrels at Saudi terminals on the Persian Gulf, according to shipping data company Kpler.
uncertain
supertankers → load → Kpler
U.S. officials have touted the role of the southern corridor in keeping energy flowing while their blockade increases pressure on Iran.
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blockade → tout → Iran
Adm. Brad Cooper, head of U.S. Central Command, said in a video on social media Saturday that U.S. forces had assisted 2,000 commercial ship transits and the transport of more than 1 billion barrels of oil from Gulf partner nations over “the past couple of months.”
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forces → say → months
Analysts estimate some 6 million barrels of oil per day or more have been passing through the Strait of Hormuz on the dark shuttle route on average — some 40% or more of prewar flows.
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barrels → estimate → flows
The workarounds keep the economy supplied, for now
Rahul Choudhary, vice president of upstream research at energy data firm Rystad Energy, did the math as follows: with 6 million or 7 million barrels per day now flowing through the southern route, plus 2 million barrels through the pipeline to Fujairah, fully 8 million or so of the blocked 15 million barrels per day from before the war have been restored.
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million → keep → war
That still leaves roughly 7 million barrels per day missing from prewar flows.
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That → leave → flows
But wait: about 3.5 million barrels per day are being drawn down from the globe's abundant oil inventories.
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barrels → wait → inventories
Meanwhile, demand has fallen by perhaps another 5 million barrels per day, due to the higher price and sluggish economic growth in key markets.
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demand → fall → markets
Add in 500,000 to 700,000 barrels per day from other suppliers such as the U.S., and that pretty much evens out the global oil market.
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that → add → market
“Our take is that the market is very tightly balanced,” Choudhary said.
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Choudhary → balance → ?
“That is why you are not seeing exceptionally high prices for crude; they are still in the $100 range, and they have not touched $140-$150 per barrel — which could have been the case if there was a deficit of 5-6 million barrels.”
uncertain
which → see → barrels
In fact, Rystad foresees oil at $85-$90 per barrel in the last three months of the year, and falling to $80-$82 next year if Hormuz is reopened.
asserted
Hormuz → foresee → 80-$82
But the workarounds are costly — and not a permanent fix
The workarounds are time-consuming and expensive.
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workarounds → consume → ?
Sending oil to Asia through the Suez Canal instead of the Red Sea can add as much as a month to the voyage.
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Sending → send → voyage
Meanwhile the Hormuz shuttle trade involves expensive tankers waiting at least a day and a half in the Gulf of Oman for the ship-to-ship transfer.
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trade → involve → transfer
The demand for supertankers has sent charter rates — normally $30,000 to $50,000 per day — through the roof.
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demand → send → roof
Spot charter rates for Hormuz transits reached $1 million per day on Sept. 11, according to maritime data company Windward, equivalent to roughly $26 per barrel.
uncertain
rates → reach → barrel
That means shipping is a quarter of the cost, instead of the usual 1% to 3%.
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shipping → mean → 3
And markets are braced for further disruption.
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markets → brace → disruption
…and 3 more, not listed.
The Aporia
