Middle East oil price war heralds post-conflict glut: Bousso
USO•Middle East oil exports rebounded to 16.6 million barrels per day in October, near the pre-war average of 17 million, while global crude production reached 85 million bpd. The recovery and constrained refining demand have intensified competition, with Saudi Arabia cutting its December Arab Light price for Asian buyers by $2 a barrel.
1. Supply rebounds
Crude exports through the Strait of Hormuz averaged 10.3 million barrels per day in October, up from virtually zero in the war’s first month, excluding Iranian shipments. Including alternative routes through Yanbu and Fujairah, regional crude exports reached 16.6 million bpd, just below the pre-war average of 17 million. Global production reached 85 million bpd, above the five-year average of 83 million.
2. Prices face pressure
Saudi Arabia cut its December Arab Light price for Asian customers by $2 a barrel from November, widening its discount against the Oman/Dubai average to $6.50. Middle Eastern crude premiums have also fallen as producers compete for buyers amid elevated freight costs and reduced refining capacity. Shipping costs average around $30 a barrel, compared with roughly $5 before the war.
3. Glut remains uncertain
The glut outlook could change if demand rebounds, damaged refineries return sooner than expected, or renewed fighting curbs supply. JPMorgan estimates global oil consumption has fallen by around 3.3 million bpd since the war began. A durable US-Iran settlement could restore passage through Hormuz and lower freight and security costs, allowing more Gulf crude onto a market where other producers have also increased output.
