Iran has stepped up attacks on tankers crossing the Strait of Hormuz even as crude exports from the Persian Gulf rebound, a recovery analysts say depends on a costly U.S. military presence rather than any lasting security gain. Brent crude remains near $100 a barrel, reflecting the risk shippers still price in.
Attacks escalate as exports recover
Iran has intensified its campaign against tankers transiting the Strait of Hormuz, threatening a fragile rebound in crude oil exports from the Persian Gulf. Nearly 20 commercial ships, mostly tankers, have come under attack over the past month while sailing through Hormuz, the Persian Gulf or off the coast of Oman, according to the Joint Maritime Information Center, a group of U.S.-allied militaries that issues security updates to merchant vessels.
It attacked roughly two ships for every 100 vessels that crossed the strait in the third quarter, said Michelle Wiese Bockmann, senior maritime intelligence analyst at Windward. Oil flows through Hormuz now depend on a major U.S. military commitment to protect tankers along a southern route off Oman, and it remains unclear how long the rebound can hold without a settlement with Tehran.
A costly shuttle system
Tankers increasingly bring crude through Hormuz and then transfer it onto ships in the Gulf of Oman for the haul to Asia. This shuttle system cuts exposure to attacks but requires more vessels to move the same oil.
Crude shipments through Hormuz averaged about 10.3 million barrels per day for the week ended Saturday, roughly 23% below a prewar baseline of 13.5 million bpd, according to Kpler data published Monday. While volumes are volatile, they have ramped up compared with earlier in the war as the U.S. military has carved out the shipping route along Oman's coast, analysts say. Shippers are ferrying crude through Hormuz at high cost to the lives of their crews and in freight and insurance rates, Bockmann said. Since July, at least nine sailors have died, 18 have been injured and three remain missing, according to the International Maritime Organization.
Prices reflect the risk
As security has deteriorated, the cost of shipping crude from the Persian Gulf to China has skyrocketed to $1 million per day for each tanker. Bob McNally, president of Rapidan Energy and a former energy advisor to President George W. Bush, said the arrangement of U.S. naval protection, ship-to-ship transfers and higher tanker rates is not seen in Washington as financially sustainable.
Brent oil prices, the international benchmark, are still hovering near $100 per barrel even as more crude makes it out of Hormuz, said Richard Meade, editor in chief of Lloyd's List. McNally added that if the market believed the current flow were sustainable, prices would likely be much lower, since it remains costly to deliver, insure and land crude in consuming regions where benchmark prices are set.
McNally said freedom of navigation in Hormuz has not been restored, and Tehran continues to insist it controls the strait. Iran's Revolutionary Guard hailed down a tanker transiting the strait on Monday and ordered it to turn around or face attack, according to an incident report from the United Kingdom Maritime Trade Operations Centre; the vessel complied.
According to Meade: "It is becoming more efficient at operating under sustained insecurity."
Source: CNBC
Trading involves risk.
Risk Disclaimer
