Uche Cecil Izuora
Some oil cargoes continue to trickle through the critical chokepoint, but under increasingly opaque operating conditions, complicating the tracking of oil and gas flows and obscuring the visibility of how much energy supply actually reaches buyers these days.
Tanker traffic through the Strait of Hormuz has collapsed by 90 per cent to 95 per cent compared to pre-war levels, analysts concur.
Traffic appears to have ramped up in recent weeks, according to an analysis of shipping data by Reuters energy columnist Ron Bousso.
More vessels are leaving the region after passing the Strait of Hormuz in a dark mode with transponders switched off, and those entering the Persian Gulf to load cargoes are increasingly doing the same.
The dark-mode tactics, once the feature of Iran-linked vessels aiming to skirt sanctions, are now the norm for the majority of commercial traffic at the Strait of Hormuz.
The threat to tankers attempting to pass the Strait of Hormuz has created a new shipping reality. Dark-mode activity, with transponders switched off, is no longer for Iran-linked vessels only. It has spread to commercial shipping of non-sanctioned barrels and other goods that typically move through the chokepoint, data from Vortexa showed last week.
Dark transits through the Strait of Hormuz have accounted for 57 per cent of all transits recorded over the period, peaking at 65.2 per cent in May.
“AIS-off movements through Hormuz are no longer only a sanctions-evasion signal. They have become a wider commercial response to conflict risk, operational uncertainty, and the need to keep Gulf cargo moving through one of the world’s most important energy chokepoints,” said Claire Jungman, Director of Maritime Risk & Intelligence at Vortexa.
The implication for the market is that it’s now more difficult than ever to track oil shipments in real time, according to Jungman.
“When clean products, LPG, and LNG also move with reduced AIS visibility, the uncertainty extends into refinery supply, product availability, regional inventories, and destination-level demand reads.”
The dark transits are adding yet another layer of uncertainty in the oil market, which has seen price volatility at multi-year highs amid conflicting signals from the U.S. and Iran, and President Trump’s social media posts about how the talks are progressing, or not.
Oil cargoes are leaving for Asian buyers such as Pakistan, India, China, likely using routes and corridors approved by Iran, as the Islamic Republic has strengthened its chokehold on the passage of tankers in the Strait.
This was the situation as of early on Friday, June 4.
It’s anyone’s guess what the situation will be in a few days’ time amid conflicting reports about the state of the U.S.-Iran negotiations.
Initially, the oil market was hoping for a swift resolution to the blocked Strait of Hormuz. Back in March, many analysts were confidently assuming that the conflict would end by May and traffic through the Strait of Hormuz would begin to normalize in June.
It’s June now, the war is in its fourth month, and the Strait traffic and geopolitical situation are anything but normalized.
Traffic remains at a fraction of the pre-war levels, and may never return to February levels as Iran seeks to retain operational control in a potential deal with the U.S., while the chokepoint is no longer considered a secure route for global oil supply.
Oil prices have remained below $100 per barrel over the past week amid hopes that a deal could be reached soon. Many traders choose to ignore warnings from analysts and from the chief executives of both Chevron and Exxon that inventories are so low that oil prices are weeks away from spiking if traffic through Hormuz remains mostly choked.
“We’re approaching unheard of inventory levels. I mean, really, really low levels,” Neil Chapman, Exxon’s Senior Vice President, said at the Bernstein 42nd Annual Strategic Decisions Conference last week.
“I think dated Brent, most people with a model would say dated Brent will shoot up once you get to that really low inventory level, up to $150, $160 — the models would tell you that.”
Chevron’s CEO Mike Wirth said on the same conference, “The buffers and the shock absorbers are being steadily drawn down and the ability for the market to absorb this imbalance is drastically diminished today versus where we started and over the next few weeks, we’re likely to see those pressures flow through more directly to physical prices, and there’s more upward pressure that I would expect as we get into June and certainly into July.”