Oil Extends Rally Despite Higher Hormuz Volume Reports

Crude oil prices continued their upward trend on Tuesday, despite reports indicating that oil flows through the Strait of Hormuz have significantly improved since the beginning of September. As of now, Brent crude is trading at $107.37 per barrel, while West Texas Intermediate is priced at $94.31 per barrel. This price gap has been fueled by the potential U.S. ban on diesel fuel exports.

According to Kpler's estimates, approximately 12.8 million barrels of oil were flowing out of Hormuz daily, which is considerably higher than most people anticipated. However, the data does not include tankers operating in "dark mode" or those engaged in ship-to-ship transfers. To circumvent the energy infrastructure damage caused by Yemeni Houthis, Saudi Arabia has resorted to ship-to-ship transfers, negatively impacting the cost-efficiency of moving crude out of the Persian Gulf.

KCM Trade's Tim Waterer remarked that a clearer picture is surfacing, with higher oil export volumes leaving the Gulf, but much of this growth still depends on workarounds like ship-to-ship transfers. These methods are less efficient and costlier than conventional operations, explaining why crude prices remain elevated. Tanker rates are at record highs as well, adding to the export cost burden and vessel availability issues, as ship-to-ship transfers require more of these vessels.

Maritime traffic is also being redirected from the Red Sea to the Cape of Good Hope, resulting in longer journeys for tankers.