Hormuz Is Disrupted, Saudi Oil Is Under Attack. So Why Is Oil Still Below $100?https://www.osint613.com/article/hormuz-is-disrupted-saudi-oil-is-under-attack-so-why-is-oil-still-below-100The Strait of Hormuz remains heavily disrupted. Saudi Arabia’s energy infrastructure has come under repeated attack. Tankers continue to sail through one of the world’s most dangerous waterways under military escort, while governments are drawing down strategic oil reserves at the fastest pace in decades.
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Instead, Brent crude was trading around $90 on July 30, while West Texas Intermediate remained below $84. Prices are significantly higher than they were a month ago, but they remain far below the levels many predicted when the conflict escalated.
The reason is not that the disruption has been minor. It is that several emergency measures have replaced enough lost supply to prevent a full scale supply shock from reaching the market.
Military Escorts Are Keeping Oil Moving
The most important factor has been the U.S. military operation inside the Strait of Hormuz.
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Pipelines Are Absorbing Part of the Shock
Saudi Arabia and the United Arab Emirates possess the only major export pipelines capable of bypassing Hormuz.
Saudi Arabia’s East West Pipeline carries crude from the Eastern Province to Yanbu on the Red Sea, while the UAE’s Habshan Fujairah pipeline delivers oil directly to the Gulf of Oman. Together, the International Energy Agency estimates they can reroute between 3.5 million and 5.5 million barrels per day under current conditions.
Those pipelines have become one of the world’s most valuable pieces of energy infrastructure.
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Supply Has Increased While Demand Has Fallen
The market has also benefited from additional production outside the Gulf.
U.S. oil production remains near record highs, while Venezuela has substantially increased exports following political changes earlier this year. Brazil and Guyana continue adding new production, contributing additional barrels at a time when every cargo matters.
Except for the tanker escorts and nations releases from their SPRs, these are long-term factors. The pipelines are likely to keep flowing, and one that has been shut down due to the chaos-war in Syria is being repaired. The renewal of Venezuela's oil production is likely to continue, and the production off Brazil's and Guyana's coasts is new and likely to increase substantially. IOW, Iran shot off its foot, with terrible timing.
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