Citi sees oil risks skewed to upside despite recovery in Gulf exports
USO•Citi said near-term oil price risks remain skewed to the upside despite Gulf crude exports recovering to more than 81% of pre-war levels in September, as shipping bottlenecks keep delivered supplies tight. More than 1 million barrels per day of Gulf crude moved through ship-to-ship transfers, while Gulf-China tanker freight rates approached $250 per metric ton, or about $35 per barrel.
1. Exports recover, logistics remain strained
Citi said the normalization of Arab Gulf oil exports has been volumetric rather than logistical, with shipping inefficiencies keeping delivered crude costs elevated. More than 1 million barrels per day of Gulf crude exports were moved via ship-to-ship transfers in September, about 7.5% of regional flows, compared with virtually none before the US-Iran conflict.
2. Freight rates surge
Gulf oil flows excluding Iran rose to more than 81% of pre-war levels in September, led by a recovery in Saudi exports despite attacks on its oil infrastructure and escalating Iranian attacks on regional shipping. Iranian exports fell to zero because of a US blockade. Freight rates for very large crude carriers on the Gulf-China route recently approached $250 per metric ton, or about $35 per barrel, more than 20 times the average over the previous decade.
