The U.S. Energy Information Administration expects about 600,000 barrels per day of Middle East oil production to stay offline through the end of 2027 as the Strait of Hormuz closure drags on longer than expected. Saudi Arabia has already more than doubled crude shipments through Egypt's Mediterranean pipeline to dodge Houthi attacks in the Red Sea.
EIA lifts its Q3 Brent forecast
The EIA raised its third-quarter Brent forecast by $11 to $85 a barrel, citing the prolonged squeeze on flows through the Strait of Hormuz. Brent was already trading near $89 a barrel in early Wednesday Asian trade, above the agency's own revised estimate, as hopes for a U.S.-Iran deal on reopening the strait fade.
The agency expects flows through Hormuz to start slowly increasing in September, with Middle East production returning to near pre-conflict averages only in early 2027. Even then, the EIA reckons around 600,000 bpd could still be offline through the end of 2027. The agency expects production and trade patterns to generally return to pre-conflict status only by early 2027, assuming Hormuz flows keep recovering as projected.
Shut-ins ease, but unevenly across producers
Middle East shut-ins averaged 5.5 million bpd in July, nearly halved from the March-May average, but third-quarter shut-ins are now estimated at 6.72 million bpd, higher than the EIA's July outlook. As of July, curtailed output still included 2.3 million bpd in Saudi Arabia, 1.96 million bpd in Iraq, and 1.05 million bpd in Kuwait.
The UAE, which quit OPEC on May 1, is the exception: it had fully restored its crude oil production by June, and ADNOC has since offered nearly 100 million barrels in spot tenders as it works around Hormuz.
Saudi Arabia reroutes through Egypt
Riyadh, meanwhile, is shifting more crude oil away from the Red Sea after Iran's Houthi allies declared a maritime embargo of the kingdom. Exports through Egypt's Mediterranean port of Sidi Kerir more than doubled to about 2.3 million bpd in August from roughly 1 million bpd in July, according to Kpler data cited by CNBC. According to Kpler's Matt Smith: "It is a big dislocation that is happening here."
Saudi exports from the Red Sea port of Yanbu through the Bab el-Mandeb Strait, by contrast, fell nearly 90% to 1.3 million barrels the week of Aug. 3, down from 11 million barrels the week of July 20. Aramco CEO Amin Nasser has said the Mediterranean route around Africa takes about 25 days longer than shipping through Bab el-Mandeb. The detour is not risk-free either: drones struck two liquefied natural gas ships at Egypt's Port of Damietta on July 30, though no one has claimed responsibility.
Trading involves risk.
Risk Disclaimer
