Tanker attacks flare near Hormuz while extra barrels cap oil prices

Fires, strikes, and ship-to-ship workarounds

Smoke is still rising from tankers near Hormuz, with attacks this month killing at least one seafarer and oil washing onto nearby beaches. Iranian media have also claimed strikes on navigational equipment near the chokepoint, leaving flows erratic and vulnerable to a slowdown.

Even so, the offshore shuttle trade keeps humming. Sentinel-2 imagery indicates roughly 13 duos of large tankers berthed side-by-side off Fujairah and Sohar on each pass, calculated on a 14-day rolling average, with the latest snapshot on Nov. 13. Bloomberg counted transfers only when both ships were at least 270 meters long, and noted totals depend on flyover timing and cloud cover.

Operators say they have to keep moving. "For us national shipping companies, there is no choice," said Khalid Alhammad, president of ship management at Saudi vessel owner Bahri, at a conference in Dubai.

Supply is swelling, prices are softening

There is plenty of crude to go around. Saudi Arabia, OPEC's de facto leader, reported October production of 10.5 million barrels a day, a rate achieved on only one other occasion since 2022. Iraq and Kuwait also logged big increases, and the United Arab Emirates is no longer constrained by OPEC quotas. Shipments from the Gulf edged down this week but still look solid despite the attacks, according to TankerTrackers.com.

More barrels have weighed on prices. At one point this week, futures were down almost a quarter for the month and Brent slid below 90 dollars. Prices for physical cargoes have also plunged as producers fight for buyers and previously exorbitant shipping costs begin to thaw.

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Freight remains historically elevated, but is well below the extremes of a month ago. AAA reported US retail gasoline slipped below 4 dollars per gallon, a level not seen since July.

The International Energy Agency said on Friday that supply is now running ahead of demand, something that hasn't occurred since the war began. Production outside the Gulf has cushioned markets, with weekly US crude, for the first time, above 14 million barrels a day, while the newest data from Brazil and Guyana show record levels. The IEA said that shift, together with a plunge in physical prices, suggests the market is "showing tentative signs of rebalancing."

Demand has sagged, keeping a lid on prices

The rebalancing has come with weaker consumption. Vitol Group estimates the Iran war has trimmed global oil demand by around 3 million barrels a day, a view echoed by other major traders. China's crude imports fell about 15% year over year in October to 9.9 million barrels a day, European nations reported double-digit declines in diesel demand, and US gasoline use came in slightly below year-ago levels during the peak summer driving season.

Tight spots remain. Even so, executives at Adipec said last week that crude markets appear amply supplied going into 2027, with additional price drops potentially easing inflation, although efforts to rebuild stockpiles drained during the war could cap how far prices retreat.

What this means for your portfolio

Before the conflict, about one fifth of the world's oil moved through Hormuz, and analysts warned a closure could send prices north of 200 dollars. Instead, resilience across the Gulf has pushed shipments back toward prewar levels and pressured prices, even as risks from attacks and spills persist. Add in producers cutting official prices - Abu Dhabi National Oil Co. this week and Saudi Arabia recently - and the near term still tilts to ample supply.

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