Oil markets stay flush despite tanker attacks

More than eight months into the Iran war, smoke continues to billow from oil tankers as Tehran presses ahead with repeated attacks near the Strait of Hormuz.

And yet there's more than enough crude on the global market.

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Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries, said it pumped 10.5 million barrels a day in October, a level reached only once since 2022. Iraq and Kuwait also reported big increases, while the United Arab Emirates is now free of OPEC quotas, allowing it to pump as much as it wants. Gulf shipments nudged lower this week, but remain healthy despite a slew of attacks, according to TankerTrackers.com.

The ample supply has added to pressure on oil prices. Futures at one point this week were down almost 25% for the month, easing inflation concerns and offering respite for the global economy. Prices for physical cargoes have also plummeted, as producers compete for customers and exorbitant shipping costs begin to thaw. The recovery is still precarious. Attacks have killed a seafarer this month and spilled oil is washing ashore on the region's beaches. With shipping under constant threat and Iranian media claiming attacks on navigational equipment near Hormuz, oil flows are erratic and could slow at any moment.

But Emirati officials at a recent conference in Abu Dhabi were keen to stress the resilience of the industry. That ability to keep crude flowing, mirrored across the Gulf, has helped bring Middle East shipments back toward pre-war levels and pushed Brent crude prices below $90 a barrel at one point this week.

"For us national shipping companies, there is no choice," Khalid Alhammad, president of ship management for Saudi vessel owner Bahri, said at a conference in Dubai. "We still have to go through the Strait of Hormuz. We have to keep moving the energy."

It's a remarkable turnaround from some of the worst fears at the outset of the war. Before the conflict, about a fifth of the world's oil flowed through Hormuz. Analysts warned that a closure could send crude prices above $200 a barrel.

Last week at Adipec, the Middle East's biggest oil conference, senior executives agreed that crude markets look well supplied heading into 2027, with further price declines easing the fight against inflation, though efforts to rebuild stockpiles depleted during the war could limit how far they fall.

The recovery reached a milestone Friday, when the International Energy Agency said oil supply was outpacing demand for the first time since the war began. Rising production beyond the Gulf has helped cushion global markets, with weekly US crude output topping 14 million barrels a day for the first time and the latest figures from Brazil and Guyana all at records.

The IEA said the shift, alongside a plunge in physical crude prices, suggested the market was "showing tentative signs of rebalancing."Pockets of tightness persist. Fuel prices remain far higher than crude, with European diesel trading at about $170 a barrel, for example. Shipping costs are also still historically elevated. Transporting crude from the US to Asia adds roughly 20% to the price of American oil, more than double the premium a year ago.