Oil's new problem isn't supply. It's logistics
USO•Middle East crude flows through the Strait of Hormuz reached 14.2 million barrels per day in late September, nearly 80% of pre-war levels, but Brent remained above $100 a barrel. Record tanker rates, insurance costs and reduced refining capacity are adding to oil-market bottlenecks.
1. Crude flows recover
Middle East crude exports have risen as Gulf producers resume transit through the Strait of Hormuz, despite continued threats of attacks. Kpler put flows at a seven-day average of 14.2 million barrels per day on September 26, nearly 80% of pre-war levels; it said figures may be revised higher because some ships disable tracking systems.
2. Shipping costs surge
The global oil deficit has narrowed to an estimated 1.6 million barrels per day from roughly 4 million at the peak disruption in May, but Brent remains above $100 a barrel and more than 40% above pre-war levels. VLCC rates for Middle East-to-Asia crude transport recently exceeded $1.2 million per day, compared with roughly $30,000 in January. Freight costs have risen from around 3% to roughly 27% of the delivered price of a barrel.
3. Refining constraints persist
Lost refining capacity in the Middle East and Russia has added pressure, particularly on diesel, whose prices have reached record highs. Competition for medium-sour crude grades used to produce diesel is also supporting crude prices. The article says transport and processing constraints may take months or years to unwind.
