Oil is Flowing from Hormuz Again-Just not the Kind the World Needs Most

Dow Jones
2小時前

Ships are ferrying almost as much crude oil out of the Strait of Hormuz as they were before the Iran war. But they are barely moving any barrels of the fuel the world needs most: diesel.

For now, the distinction is paramount in American politics. President Trump's team has explored a long list of options to arrest the skyrocketing price of diesel fuel, which factors into the cost of groceries, gadgets and just about everything else moved on semitruck beds.

The national average for a gallon of diesel hit a record $6.53 late last month. In California, where supplies are increasingly tight and fuel taxes are higher, diesel reached a historic high of $8.44 a gallon.

"Consumers don't buy crude oil. They buy gasoline, jet fuel and diesel," said Andy Lipow, president of Lipow Oil Associates in Houston. "As a result of missile and drone strikes in the Middle East, several large refineries have been damaged. The world finds itself short of refined products."

The recovery in oil flows out of the Strait of Hormuz won't fix the problem anytime soon. As of Saturday, the seven-day average for crude-oil cargoes clearing the critical waterway between Iran and Oman reached 10.3 million barrels a day, or 76% of the prewar baseline, according to the latest available data from market intelligence firm Kpler.

But cargoes of oil products like gasoline and diesel came to 1.3 million barrels a day, accounting for only 11% of the overall flows -- the rest was unrefined crude oil. Before the war, refined products typically represented more than 20% of the oil cargo passing through the strait.

The Trump administration is putting pressure on its allies abroad. The Group of Seven major economies on Friday agreed to release 100 million barrels of crude oil and fuel from their emergency stocks. They also declined to restrict exports of diesel and other petroleum products, an option Trump had said he was considering as a way to keep more fuel in the U.S.

The primary reason that diesel and other refined products aren't making it out of the Middle East is that refineries across the region, in Saudi Arabia, Kuwait, the United Arab Emirates, Iraq and elsewhere, are down following missile strikes and other outages stemming from the war. In roughly a month, most of the unrefined crude that is making its way through the strait will arrive in Asia, where countries need oil but are exporting little in the way of ready-to-burn fuel like diesel. China, Japan and South Korea are keeping most of their products at home.

That leaves the U.S. in a familiar predicament as one of the lone suppliers in a world running low on fuel. Analysts say a full recovery, if current flows can be sustained, wouldn't happen until well into 2027. It will take time for countries to repair oil fields and refineries and for the market to replace the hundreds of millions of oil barrels lost to the war.

In recent days, Iran has launched a new wave of attacks on vessels around the strait, which could slow the recent rebound in shipments. Although it can take a few days for Kpler's data to catch up with present-day flows, the data so far show tankers are still making their way through the waterway in high volumes.

American oil executives have advocated that the U.S. Navy make it a higher priority to escort tankers carrying petroleum products such as diesel, rather than those carrying crude oil, which is fetching about half the price of diesel, people close to the industry said.

Most of the vessels the U.S. has escorted through the strait thus far have been what are known as VLCCs, or Very Large Crude Carriers, that can transport about 2 million barrels of crude. That is double the capacity of the largest class of tankers that carry fuel products.

In a sign that the U.S. has wrested control of flows in the strait from Iran, Saudi Arabia's crude exports are surging higher, said Matt Smith, an analyst at Kpler. The kingdom's oil exports in September came to 7 million barrels a day, double August's haul, as the country loaded tankers in both the Persian Gulf and the Red Sea, Kpler data show.

"Either Saudi has made the decision that the risk is worth the reward, or they are trying to make hay while the sun shines, and some kind of escalation causes them to pull back again," Smith said.

 

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