Gulf Oil Exports Surpass Even Prewar Levels But Brent Hovers at $110

Oil exports from the Persian Gulf have briefly exceeded prewar volumes, yet Brent has returned to around $110 a barrel as traders price in renewed military escalation and the fragility of the shipping recovery.

The most actively traded Brent futures contract stood at $111 early Thursday.

The benchmark last approached that level in late April, when regional exports were roughly half their current volume.

The divergence reflects a market concerned about whether supplies can keep moving, with depleted inventories offering less protection against another interruption.

An Export Recovery Under Pressure

Persian Gulf shipments, through both the Strait of Hormuz and alternative routes, exceeded 24 million barrels a day in the week through October 18, according to Kpler.

That surpassed the prewar rate of 23.3 million.

The rebound then weakened sharply. Exports fell to at least 15.7 million barrels a day in the week through October 26.

“This recovery has coincided with a sharp deterioration in maritime security as vessels remain exposed to attacks and insurance and freight costs have risen sharply,” Giovanni Staunovo, commodities strategist at UBS told The Wall Street Journal.

Commercial shipping attacks near Hormuz reached a monthly record in October.

Damage to tankers and infrastructure, including a key Saudi pipeline, has pushed exporters toward alternative pipelines and ship-to-ship transfers.

Moving Gulf crude to Asia cost nearly $36 a barrel in early October, according to the International Energy Agency, more than five times the prewar rate.

Iran’s newly established Persian Gulf Strait Authority has also threatened unspecified legal action against Sinokor vessels from November 1.

The South Korean company’s ships represented more than one-fifth of confirmed, identified crude and oil-product tanker traffic through Hormuz over the past three months, Kpler said.

Pricing the Next Disruption

Investors fear U.S. strikes on Iran could resume after next week’s midterm elections, interrupting supplies again.

Washington has told several Gulf Arab countries to prepare for a short, intense campaign after the vote, The Wall Street Journal reported.

That prospect contrasts with April and May, when a ceasefire and negotiations had raised hopes of a peace agreement.

Goldman Sachs estimates that concern over fresh disruptions accounts for about $27 a barrel of Brent’s price.

Refiners are securing available cargoes, while investors are purchasing futures as protection against an energy shock.

Natasha Kaneva, JPMorgan’s head of global commodities strategy, puts Brent’s fair value at $94 a barrel, substantially below its market price.

Low Inventories, Returning Chinese Demand

Readily accessible on-land oil inventories worldwide are close to their lowest level since at least 2016, according to the IEA.

Morgan Stanley analysts say recovering exports do not mean overall supplies have recovered: total market supply, including oil delivered to domestic refineries, remains below last year’s levels.

China is adding buying pressure. Its crude imports fell by three million barrels a day in May and June, helping restrain prices, but have risen since their June low.

Ship-tracking figures indicate another increase in October from September.

For American motorists, relief remains limited. Regular gasoline averaged $4.25 a gallon on Wednesday, according to AAA, and has generally remained above $4 since April despite easing in recent weeks.