A reality check on #Hormuz and Mideast Gulf oil flows. 🧵 There is a growing narrative that oil flows are normalizing, Mideast Gulf producers, particularly the #UAE, are successfully navigating the disruption and, therefore, the worst of the supply crisis may be behind us. The physical reality remains considerably more complicated. 1/ US officials have repeatedly stressed that Washington controls #Hormuz and that significantly more oil is moving through the strait. Energy Secretary @SecretaryWright now puts flows at 8mn-9mn b/d, arguing conventional vessel tracking is undercounting traffic because ships are moving with AIS transponders switched off and under military escort. 2/ That may well mean more barrels are moving than trackers can see. But more oil moving through an active war zone is not the same thing as normalisation. 3/ Consider the UAE: @ADNOCGroup said on 7 August that 15 of its vessels had been targeted by missiles and drones while transiting Hormuz since the war began, three in the preceding week alone. This is hardly business as usual. 4/ #SaudiArabia, despite having considerable optionality too, is not insulated either. The kingdom has relied heavily on its 7mn b/d East-West pipeline to Yanbu to bypass Hormuz, with barrels also moving north through Egypt’s Sumed pipeline and Suez. But the Red Sea itself is now exposed to renewed Houthi threats and attacks. 5/ Others have considerably fewer options. #Kuwait remains overwhelmingly dependent on Hormuz and has had to shut in much of its oil production, while #Qatar has no equivalent large-scale bypass for LNG produced inside the Gulf. 6/ #Iraq has its northern route to #Ceyhan, but current flows are nowhere near sufficient to replace its normal southern exports. Baghdad is now targeting substantially higher northern capacity while looking again at alternative routes to the Mediterranean. 7/ Here lies the uncomfortable paradox: Every Mideast Gulf cargo that successfully crosses Hormuz demonstrates resilience and returns desperately needed supply to the global market. But portraying those movements as evidence that the strait has been brought under control risks obscuring the security environment in which those vessels, crews and companies are operating. It also misinforms markets. 8/ There is potentially a strategic consequence too. The more Mideast Gulf producers are portrayed as successfully restoring exports under US protection, the greater the risk that their commercial energy infrastructure becomes entangled in the wider US-Iran confrontation. Commercial resilience, long planned for by countries such as the UAE and Saudi Arabia, should not be mistaken for strategic immunity. 9/ That distinction matters for Washington too. Declaring Hormuz effectively under control while Gulf companies continue to absorb attacks creates a disconnect between the political narrative and the physical reality confronting producers, shipowners, insurers and, most importantly, crews. Military capability to escort vessels through a chokepoint is not the same as restoring confidence in that chokepoint. 10/ Perhaps the clearest indication of how Mideast Gulf capitals themselves view the situation is where they are putting their money. The UAE is expanding crude export capacity outside Hormuz, investing in shipping and logistics, while Adnoc Gas is exploring potential LNG infrastructure on the UAE’s east coast. Saudi Arabia is examining additional Hormuz-bypass capacity. Iraq wants substantially more crude moving north through Ceyhan. These are not the investments of countries assuming the vulnerability is disappearing anytime soon. 11/ Mideast Gulf producers are keeping energy flowing while vessels are being targeted, their infrastructure already damaged and alternative routes are being threatened by #Iran. So yes, more oil may be moving through Hormuz. But don’t mistake adaptation for normalisation. #oott

A reality check on #Hormuz and Mideast Gulf oil flows. 🧵 There is a growing narrative that oil flows are normalizing, Mideast Gulf producers, particularly the #UAE, are successfully navigating the disruption and, therefore, the worst of the supply crisis may be behind us. The physical reality remains considerably more complicated. 1/ US officials have repeatedly stressed that Washington controls #Hormuz and that significantly more oil is moving through the strait. Energy Secretary @SecretaryWright now puts flows at 8mn-9mn b/d, arguing conventional vessel tracking is undercounting traffic because ships are moving with AIS transponders switched off and under military escort. 2/ That may well mean more barrels are moving than trackers can see. But more oil moving through an active war zone is not the same thing as normalisation. 3/ Consider the UAE: @ADNOCGroup said on 7 August that 15 of its vessels had been targeted by missiles and drones while transiting Hormuz since the war began, three in the preceding week alone. This is hardly business as usual. 4/ #SaudiArabia, despite having considerable optionality too, is not insulated either. The kingdom has relied heavily on its 7mn b/d East-West pipeline to Yanbu to bypass Hormuz, with barrels also moving north through Egypt’s Sumed pipeline and Suez. But the Red Sea itself is now exposed to renewed Houthi threats and attacks. 5/ Others have considerably fewer options. #Kuwait remains overwhelmingly dependent on Hormuz and has had to shut in much of its oil production, while #Qatar has no equivalent large-scale bypass for LNG produced inside the Gulf. 6/ #Iraq has its northern route to #Ceyhan, but current flows are nowhere near sufficient to replace its normal southern exports. Baghdad is now targeting substantially higher northern capacity while looking again at alternative routes to the Mediterranean. 7/ Here lies the uncomfortable paradox: Every Mideast Gulf cargo that successfully crosses Hormuz demonstrates resilience and returns desperately needed supply to the global market. But portraying those movements as evidence that the strait has been brought under control risks obscuring the security environment in which those vessels, crews and companies are operating. It also misinforms markets. 8/ There is potentially a strategic consequence too. The more Mideast Gulf producers are portrayed as successfully restoring exports under US protection, the greater the risk that their commercial energy infrastructure becomes entangled in the wider US-Iran confrontation. Commercial resilience, long planned for by countries such as the UAE and Saudi Arabia, should not be mistaken for strategic immunity. 9/ That distinction matters for Washington too. Declaring Hormuz effectively under control while Gulf companies continue to absorb attacks creates a disconnect between the political narrative and the physical reality confronting producers, shipowners, insurers and, most importantly, crews. Military capability to escort vessels through a chokepoint is not the same as restoring confidence in that chokepoint. 10/ Perhaps the clearest indication of how Mideast Gulf capitals themselves view the situation is where they are putting their money. The UAE is expanding crude export capacity outside Hormuz, investing in shipping and logistics, while Adnoc Gas is exploring potential LNG infrastructure on the UAE’s east coast. Saudi Arabia is examining additional Hormuz-bypass capacity. Iraq wants substantially more crude moving north through Ceyhan. These are not the investments of countries assuming the vulnerability is disappearing anytime soon. 11/ Mideast Gulf producers are keeping energy flowing while vessels are being targeted, their infrastructure already damaged and alternative routes are being threatened by #Iran. So yes, more oil may be moving through Hormuz. But don’t mistake adaptation for normalisation. #oott

Source:https://x.com/staunovo/status/2088263580151861430