Kuwait Sustains About 1 Million Barrels a Day of Oil Exports as Tankers Navigate Hormuz
Kuwait is exporting close to 1 million barrels of crude a day, including through ship to ship transfers outside the Strait of Hormuz, as flows through the waterway partially recover. Sheikh Khaled Al-Sabah, managing director for international marketing at the state owned Kuwait Petroleum Corporation, said the company is also delivering cargoes directly to customers, using its own tankers alongside chartered vessels, per Bloomberg.
The recovery is real but partial, and it is priced
Kuwaiti crude shipments have climbed back to roughly two thirds of the 1.6 million barrels a day the country averaged last year, on our calculation a recovery to about 63 percent, after exports fell to a multi year low following the start of the war in late February. The cost structure has moved with the risk: buyers taking Kuwaiti crude outside the Strait will pay more to offset the transit risk, while those receiving cargoes inside the Gulf are offered discounts, Sheikh Khaled said at the S&P Global APPEC conference in Singapore. He added that the corporation can supply all of its customers, though some volumes are not what they were.
How much still moves through Hormuz is disputed
Estimates of daily throughput diverge sharply. Vitol Group’s chief executive put flows at about 10 million barrels, of which 9 million is crude, while Macquarie Group estimated roughly 7 million barrels a day of crude and refined fuel, both per Bloomberg. Even the higher figure is about half the roughly 20 million barrels a day that crossed before the war, and on the midpoint of the two estimates the waterway is carrying close to 43 percent of its pre war volume, on our calculation. Shipments have continued even as fighting between the United States and Iran resumed after a relative lull, and Iran has said a deal with Oman to manage traffic through the strait is close. Kuwait is separately assessing alternative pipeline routes to export crude, including through Saudi Arabia and the United Arab Emirates, and plans to raise refinery run rates to lift fuel supply as product markets, diesel included, stay tight.
Why it matters: Kuwait’s export recovery shows how Gulf producers are routing around the chokepoint rather than being shut in by it, on our reading, and it comes at a price, with the corporation charging more for deliveries outside the strait to compensate for transit risk. The near 1 million barrel a day figure is close to two thirds of last year’s average, so the shortfall is real, but the shuttle trade and direct deliveries have allowed the corporation to keep supplying all of its customers, though some are receiving lower volumes. The pipeline study, if it advances, points to a structural hedge against Hormuz that would outlast the current disruption.
Outlook: The near term path depends on the waterway itself, where the estimates disagree by 3 million barrels a day, on our calculation, and shipping access through the strait remains uncertain. Kuwait’s plan to lift refinery runs speaks to the same tight product market that has kept diesel bid, per our published commodities coverage. Whether the alternative pipeline routes through Saudi Arabia and the United Arab Emirates move from assessment to commitment is the longer signal to watch.
Sources: Bloomberg, Kuwait Petroleum Corporation, The Edge.
