Strait of Hormuz Reopens, Boosting Middle East Oil Exports to Four-Month High
The Strait of Hormuz is witnessing a resurgence in oil exports after over 100 days of disruption. Middle Eastern fuel oil exports are projected to reach a four-month high in June, driven by supply diversions from Iraq and Saudi Arabia, along with a gradual increase in shipments through this vital passage. Trade sources and shipping data indicate that exports may hit approximately 2.4 million metric tons, or 508,000 barrels per day, marking a more than 20% increase compared to May.
Despite this uptick, current export levels remain significantly lower than the pre-war monthly average of 5.5 to 6.0 million tons. Palash Jain, a Middle East oil consultant at FGE NexantECA, noted that while fuel oil flows through the Strait of Hormuz are expected to rise over the next 60 days, the recovery is unlikely to be substantial due to ongoing uncertainties surrounding negotiations and the durability of the peace deal.
Hormuz Back in Business
On Wednesday, the Aframax tanker Gamsunoro, carrying about 80,000 tons of fuel oil from Iraq, successfully navigated the Strait of Hormuz en route to Fujairah. However, Jain cautioned that several factors could limit export growth, including tight regional balances and limited capacity for increased refinery runs, particularly as peak summer demand approaches. High-sulfur fuel oil (HSFO) is crucial for powering ships and generating electricity, and it is also processed at refineries.
In June, the leading HSFO exporters from the Middle East include Syria, Saudi Arabia, and Oman. Iraq has begun exporting fuel oil via Syria’s Baniyas port, achieving record volumes exceeding 600,000 tons this month. Jain emphasized that Iraq is focusing on diversifying its export routes, with the Syrian corridor serving as a strategic alternative to Hormuz. Prior to the conflict, Iraq primarily exported fuel oil from the Khor al-Zubair port.
Saudi Arabia is also set to export over 300,000 tons of fuel oil in June from the Red Sea port of Yanbu, marking its highest export level in five months. Meanwhile, Oman’s fuel oil exports are expected to reach nearly 300,000 tons, the highest in over two years. Despite the interim peace deal’s 60-day US sanctions waiver, Iranian fuel oil trade is anticipated to remain constrained due to ongoing banking and payment challenges. Since the deal, oil prices have dropped from above $100 per barrel to around $70 per barrel.
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