A “cease fire” has not reopened the needed commerce routes in the Strait of Hormuz or restored the energy source capacity of countries suffering from the situation. While two American-flagged merchant ships did traverse the waterway, normally, business for most commercial use of the Strait of Hormuz is at a standstill. Encouragement to restore travel in the Strait of Hormuz is not at a “high confidence” level, and merchants of most countries are reluctant to try their luck.
Alternatives to shipping the crude oil sought after by the global energy community, feeling the hardship of the blockade, do exist. According to Jesus Davis, Senior VP of Energy Services at Industrial Info Resources, “This includes the Saudi East/West crude oil pipeline, the Habshan to Fujairah crude oil pipeline in the United Arab Emirates, and the Kirkuk (Iraq) to Ceyhan (Turkey) crude oil pipeline.
The Saudi East/West crude oil pipeline, also referred to as the Petroline, begins at the Abqaiq oil field in the Eastern Province (near Bahrain and Qatar on the Persian Gulf coast) and heads west across the Arabian Peninsula to Yanbu on the Red Sea, where vessels can then be loaded. The pipeline appears to be running at full capacity, which is approximately 7 million barrels per day.
Also in the United Arab Emirates is the Habshan to Fujairah crude oil pipeline, also known as Abu Dhabi Crude Oil Pipeline (ADCOP), which has a capacity of 1.5 to 1.8 million barrels per day. The pipeline starts from the Habshan onshore field in Abu Dhabi and runs to Fujairah on the Gulf of Oman. This is south of the Strait of Hormuz, but Fujairah has been a target of Iranian drone attacks as recently as today.
Finally, Iraq has been exporting limited volumes via the Kirkuk (Iraq) to Ceyhan (Turkey) crude oil pipeline, also known as the Iraq–Turkey Crude Oil Pipeline. The dual pipeline system was designed with the capacity to export 1.6 million barrels per day, but volumes have been limited to less than 300,000 barrels per day as the pipeline needs significant repairs.”
Although this sounds like viable alternatives to the Strait of Hormuz stalemate, crude has dropped from around 20 million barrels to approximately 10 million barrels per day exiting the region. Gulf countries have cut production and started relying on storage. Without a clear resolution, rationing and price hikes are prevalent. While the Strait of Hormuz conflict continues, expect the lack of crude to impact other markets such as fertilizer, sulfur, and helium. A ceasefire did not achieve the restoration of crude shortages, and economically, the energy industry recovery looks to be a longer road as hostilities remain.