Gulf crude exports are near 80% of pre-war levels, but oil is still priced for war

Brent crude futures fell $2.69, or 2.6%, to settle at $102.59 a barrel on 29 September. US crude fell 3.5%, to $89.38. Reuters reported that the fall came after Saudi Arabia resumed tanker loadings at Yanbu, its Red Sea port, once it had restarted the East-West pipeline that feeds it. Even so, Brent was on course for a gain of about 13% in September.

The oil is coming back. Kpler, which tracks tankers, estimated that crude exports from the main Middle East producers rose to 16.33 million barrels a day in September. That is the most since the US-Israeli war on Iran began on 28 February, but still 3.2 million short of the 19.51 million shipped in February. In a note on 28 September, Kpler put the region’s crude exports at “just under 80% of pre-conflict levels”.

The price has come back much less. Spot Brent, the price of physical North Sea cargoes, was $114.89 on 22 September, the latest daily price from the EIA. That is 61% above its price of $71.32 on 27 February, the last trading day before the war. Supply is about a fifth short of normal, and the price still carries a large part of the war premium.

Where the barrels come from

Saudi Arabia did most of the work. Kpler tracked Saudi exports at about 5.4 million barrels a day in September, more than double the 2.45 million of August. Shipments from Ras Tanura, its main terminal in the Gulf, rose to about 3.25 million a day, from 929,000 in August, but were still well below the 6.41 million of February. Kpler counted 19 supertankers, each with 2 million barrels on board, leaving the Strait of Hormuz last week.

Flows through the strait itself were on course for about 9.72 million barrels a day this month. The rest of the total goes around it: Kpler’s count includes ship-to-ship transfers in the Gulf of Oman, the UAE’s terminal at Fujairah, Oman’s terminals outside the strait, and Saudi cargoes from the Red Sea.

These routes are less secure than the old ones. The Red Sea route depends on the East-West pipeline, and attacks damaged it. While it was shut, Saudi Arabia sent its crude through Hormuz instead. One more attack can close the route again.

What a peace price looked like

The market has shown this year what it pays when it expects the war to end. In early July, while a ceasefire between the US and Iran held, spot Brent fell to $68.53 on 2 July, below its February level. The six-month Brent futures spread, the premium of the nearest contract over the one six months later, was flat or in a small contango, John Kemp noted.

Spot Brent, $ a barrel. Source: US Energy Information Administration via FRED.

27 Feb	71.32
7 Apr	138.21
2 Jul	68.53 (ceasefire)
15 Sep	130.80
22 Sep	114.89

Source: US Energy Information Administration via FRED.The Macro Notebook

After the ceasefire broke down, the spread moved the other way. By 8 September the nearest contract was $15 above the one six months out, and by 15 September the gap was more than $20. A spread that wide means buyers pay far more for oil now than for oil later. It says that the shortage is severe today and that it will ease with time.

So the market bets on two things at once. It expects the flows to keep their recovery, which is why the price fell when Yanbu restarted. It does not expect the war to end soon, which is why the price is nowhere near the July level.

Why the premium stays

The first reason is stocks. The EIA’s September outlook estimates that global oil inventories have fallen by 400 million barrels this year, and it expects them to keep falling to the end of 2026. Exports at 80% of normal still take barrels out of storage every day. A full recovery in flows would take months to refill the tanks.

The second is the talks. American and Iranian officials spoke with mediators on 28 September, but President Trump denied reports that he had offered Iran sanctions relief. Dennis Kissler of BOK Financial told Reuters that “as more oil flows through the Middle East, the less bargaining power Iran will have.” That cuts both ways. An Iran with less power at the table may look for it at sea.

The third is the routes themselves. Most of the recovery depends on ports and pipelines within range of drones and missiles. The East-West pipeline has already failed once.

What to watch

Kpler’s weekly tanker counts will show whether the Saudi loadings at Yanbu hold. The EIA publishes its October outlook on 6 October, the first to include both the September jump and the recovery in exports. A sign that the talks have made progress would pull the nearest contracts down first, because they carry most of the premium. Another attack on a pipeline or a tanker would push them up just as fast.