Oil is Flowing in the Persian Gulf Again-so Why Aren't Gas Prices Dropping?

Dow Jones
Yesterday

Crude oil prices continued to march higher Wednesday despite a new report showing that Persian Gulf exports returned to their prewar levels in September.

Futures for Brent crude, the international standard, were hovering just shy of $100 at $99.12, while West Texas Intermediate, the U.S. benchmark, was at $91.87. Both rose more than 2% Wednesday morning.

Despite ongoing disruptions tied to the Iran war, Persian Gulf oil exports are currently up to 23.3 million barrels a day, in line with their 2025 average, according to a research note from Goldman Sachs analysts released late Tuesday. They had previously fallen below 10 million barrels a day in the first weeks of the war in March.

"Increased Hormuz exports, including via ship-to-ship transfers, have driven this exports recovery," the analysts wrote, "despite the attack on the Saudi East-West pipeline, which disrupted oil flows to Yanbu for nearly two weeks, and the continuing Houthis blockade of Saudi exports via Bab-al-Mandab." Ship-to-ship transfers typically take place in international waters to make them harder to intercept.

Notably, Goldman's estimate includes so-called "dark exports," which occur when oil tankers switch off their transponders to minimize chances of being attacked or diverted while traversing the Gulf. These secretive transits have contributed to upward revisions of oil flows through the Gulf as data trickles in later once ships dock at ports and storage levels are updated.

So why aren't oil prices falling? For one, futures contracts are based on prices to be paid a couple months out. And that's a big question mark. Uncertainty on future prices is so high that J.P. Morgan analysts recently stopped issuing estimates.

Another concern is that while exports have bounced back, reserves have not. The U.S.'s Strategic Petroleum Reserve is currently at its lowest level since the early 1980s.

Until both these factors are resolved, or at least show signs of improving, expect oil and gas prices to remain aloft.

 

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