Although geopolitical tensions in the Strait of Hormuz have not yet fully subsided, the world's oil giant, Saudi Arabia, has reportedly managed to ship about 34 million barrels of crude oil through the critical maritime route since the ceasefire began on June 17.
Strangely, data from IMF PortWatch reveals that only about 27 commercial ships have been detected sailing through the strait every day with active automatic identification system (AIS) signals.
The number of commercial ship traffic has actually dropped sharply to only one-third (1/3) compared to the average of 84 ships per day before the war broke out. So, how can Saudi Arabia so easily ship so much oil in a 'idle' strait?
'Ghost Ship' Tactics & Government Insurance Become Key
Because the market is still cautious, the recovery of crude oil exports in the Gulf has occurred unevenly. Many independent tanker owners (independent/private) are still afraid to pass through the Strait of Hormuz because war risk insurance premiums have soared eight times higher than before the conflict.
To overcome this problem and ensure that oil continues to reach global markets, exporting countries are using their own tactics:
Government-Owned Fleets: The vast majority of oil is transported using government-owned tankers that are covered by sovereign insurance schemes.
AIS Signal Shutdown: Most tankers have been detected deliberately limiting or completely shutting down their AIS detection signals to avoid detection on civilian radar (a cloaking tactic).
Not only that, the physical challenges remain. A Bloomberg report revealed on July 4 that four tankers were forced to turn back after receiving radio warnings from Iran’s Islamic Revolutionary Guard Corps (IRGC).
Strait of Hormuz ‘Bypass’ Strategy & UAE’s Aggressive Moves
To reduce dependence on the often turbulent Strait of Hormuz, Gulf countries are now beginning to maximize the use of land pipelines (pipelines) that bypass the strait:
Saudi Arabia: Using the East West Pipeline that channels oil directly to the Red Sea.
UAE: Using the Habshan Fujairah pipeline to send oil directly to the Gulf of Oman.
In a related development, the United Arab Emirates (UAE) is seen taking great advantage after they left the OPEC alliance. The UAE is now aggressively accelerating their crude oil production and expanding direct sales to the Asian market. Economy
Iran Begins ‘Charging’ Ships Passing Through, But Will It Give Discounts Near China?
Meanwhile, Iran is reportedly planning to impose a service charge on any ship passing through the Strait of Hormuz. However, Iranian authorities insist that this charge is not in the form of a “transit toll” as claimed by some parties.
Iran's ambassador, Abdolreza Rahmani Fazli, stated that their parliament will give consideration and 'special privileges' (possibly in the form of discounts or exemptions from charges) to countries considered friendly to Iran, especially China.
The move by Saudi Arabia and the UAE to continue flooding the market with crude oil proves that global supply is recovering quickly even though the Strait of Hormuz route is still at risk.
We expect crude oil prices (Brent & WTI) to potentially face short-term selling pressure if this oversupply sentiment continues, coupled with the UAE's move to now freely pump oil without OPEC quotas.
Black gold commodity investors must pay attention to the extent to which Iran's new charges will be effective against tanker transportation costs from now on!
Do you think the UAE's move to leave OPEC and pump oil like crazy will cause world oil prices to plummet? Try dropping your comments below!
