Middle East oil squeeze: How much crude is actually flowing through Hormuz

How much oil is flowing through HormuzThe US-Iran conflict has kept the Strait of Hormuz in a chokehold for nearly six months and the oil market is left grappling with one big question: how much crude is actually getting through?While market estimates suggest flows have fallen sharply from pre-war levels, US officials say the picture may be far less bleak.The strait is effectively closed to oil tankers, and any drop in shipments can push prices higher. Iran has fired at dozens of tankers trying to pass through, while ship trackers using transponder data and satellite images have recorded a sharp fall in tanker traffic.Global oil inventories have also continued to decline. US energy secretary Chris Wright, however, sees it differently, saying that the strait remains open and that oil is flowing through it much faster than the market realises.The US military is patrolling the waterway and escorting ships, while the Navy shares information on vessel movements with the Department of energy.“In coordination with the US military, the US Department of Energy maintains the best available data related to oil and oil products leaving the Arabian gulf,” a DOE spokesperson said, as cited by CNN.US President Donald Trump has also repeatedly said the US controls the Strait of Hormuz and that a deal with Iran is imminent. Wall Street, meanwhile, has largely stuck to third-party shipping data and inventory figures. But with the numbers now telling very different stories, some analysts are beginning to wonder whether Washington may have a point.Conflicting data clouds the pictureWright said the seven-day average of oil flowing out of the Strait of Hormuz had risen to 9 million barrels per day. That conflicted with Iran's claim that the strait was closed and with ship-tracking data showing flows at about half that level.“It is becoming increasingly difficult to know how much oil is leaving the Gulf,” said Hamad Hussain, senior climate and commodities economist at Capital Economics. “Contrasting claims by US and Iranian officials are muddying the waters.”Wall Street analysts use tracking services including Kpler and Windward Intelligence, alongside other sources, to estimate oil flows. Their data has indicated that tankers have been carrying about 4 million barrels of oil out of the Persian Gulf each day.Another roughly 7 million barrels per day has been rerouted around the strait through pipelines and other methods, putting total flows at around 11 million to 12 million barrels a day. That is significantly below the 20 million barrels per day exported by the region before the Iran war began.Wright said, however, that total oil coming out of the Gulf exceeded 20 million barrels on August 8.Kpler defended its data, saying its tracking network includes 13,000 owned-and-operated receivers across 190 countries monitoring 350,000 vessels, with locations updated every five minutes.“It is not possible to reconcile the disparity between what we see and what he is quoting,” said Matt Smith, director of commodity research at Kpler.Windward and other tracking services use satellite imagery and artificial intelligence to track ships even when their transponders are switched off. This allows them to follow so-called shadow fleets trying to conceal their locations to avoid detection.Both Kpler and Windward showed only about five ships in total leaving the Strait of Hormuz on the day Wright said 20 million barrels had flowed out of the Arabian Gulf region. More than 100 ships transited the strait each day before the war, suggesting there were not enough vessels to carry the volume Wright cited.Shadow fleet adds to uncertaintyHussain acknowledged that the oil market's picture may be incomplete.Iran has become more aggressive in attacks on ships in recent weeks, while its Houthi allies have also stepped up attacks in the Red Sea. More vessels travelling through the Strait of Hormuz and the Bab-al-Mandeb have therefore been trying to conceal their locations and cargoes to avoid attack.About half of the traffic Kpler has tracked through the Strait of Hormuz in recent weeks has consisted of shadow transits, up from around one-eighth a month ago. The DOE argues that its tracking does not capture everything.Hussain said the market could eventually discover that more oil had left the region than currently estimated when slow-moving tankers switch their transponders back on after leaving danger zones.Dan Pickering, founder and chief investment officer of Pickering Energy Partners, said he was open to the Energy Department's numbers.“The US is enabling a decent amount of oil to get through the Strait, and Iran is not stopping everything,” he said. “In a world where the administration has earned a lot of skepticism, you probably can do no better take a trust-but-verify approach.”“It is certainly possible that he is right,” he added.More oil could keep prices lowerWall Street has previously acknowledged that it may have underestimated how much oil was leaving the strait.Natasha Kaneva, JPMorgan's head of global commodities strategy, said in June that relatively low oil prices had made her reconsider how much oil could be leaving the Persian Gulf. She acknowledged the possibility of significant “clandestine” oil moving on tankers with transponders switched off.JPMorgan uses Kpler shipping data among several sources for its oil supply and demand estimates.The market has largely sided with the Trump administration, maintaining hope that a resolution is coming and that the military can keep oil flowing. This has kept prices lower than the scale of the supply shock might otherwise suggest.If more oil is flowing through the strait than expected, stockpiles could rebuild faster and prices could stay lower for longer, giving Trump economic and political cover in his standoff with Iran.But Hussain, as cited by CNN, said that the precise oil-flow estimate matters less for prices than for market stability.Global inventories are now between 1.5 billion and 1.9 billion barrels below their levels at the start of the war, depending on the estimate. Large crude stockpiles before the war helped prevent catastrophe when supplies dried up.The oil market remains in deficit, but higher flows through the Strait of Hormuz would allow it to delay the point at which reserves become insufficient to meet global demand.“The market can’t keep pulling down inventories forever,” said Pickering. “Sooner or later, the cupboard runs bare.”