Oil's new problem is logistics
A lot more crude is getting through the Strait of Hormuz. So why is Brent still trading above $100 per barrel?
Oil prices have remained above $100 per barrel despite a significant increase in crude exports through the Strait of Hormuz. The embattled waterway saw 14.2 million barrels per day (bpd) on average in the week ending Sept. 26, nearly 80% of prewar levels. While volumes have declined since, they are likely to be revised higher due to ships disabling satellite tracking systems while traversing the strait.
However, Brent still trades above US$100 per barrel. The issue lies in logistics. The global oil industry has been disrupted by record-high tanker rates, soaring insurance costs, and a severe shortage of refining capacity. This has created bottlenecks and left consumers facing high energy bills, even if the crude supply squeeze eases.
Iran's blockade of the strait following the war with the United States and Israel forced Gulf producers to divert supplies through alternative routes. Saudi Arabia, the world's largest oil exporter, redirected its exports through its East-West pipeline, which delivers crude to the Red Sea port of Yanbu. However, the pipeline was attacked by Iranian-backed Iraqi militias, forcing Saudi Arabia to redirect exports back to the Gulf via Hormuz.
This has led to a surge in tanker rates, now exceeding $1.2 million per day, which have become a major price driver. Additionally, the loss of refining capacity in the Middle East and Russia has further compounded the problem, particularly for diesel. The Group of Seven's decision to release diesel from strategic stocks may provide temporary relief, but it does not restore lost refining capacity. As a result, consumers will continue to face persistently high energy bills.
Written by urgent.news from The Jakarta Post's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
