The Strait of Hormuz is slowly recovering its business after more than 100 days of disruption, with tankers once again flowing through the key passage. As the corridor is all set to get busy, Middle Eastern fuel oil exports are expected to climb to a four-month high in June, driven by supply diversions from Iraq and Saudi Arabia and a gradual increase in shipments through the passage, according to trade sources and shipping data.Supply from the region may rise further as more cargoes begin to move out of the strait following an interim agreement between the United States and Iran aimed at ending their conflict. Data from Kpler and LSEG, cited by Reuters, indicates that Middle Eastern exports are projected to reach around 2.4 million metric tons (508,000 barrels per day) this month, marking an increase of more than 20 per cent compared with May.However, this remains significantly below the pre-war monthly average of 5.5 million to 6.0 million tons.“Fuel oil flows through the Strait of Hormuz are expected to increase over the next 60 days, but the recovery is unlikely to be substantial,” said Palash Jain, Middle East oil consultant at FGE NexantECA.Jain added that uncertainty over the outcome of negotiations and the durability of the peace deal is likely to keep shipping activity cautious.
Hormuz back in business
Earlier on Wednesday, the Aframax tanker Gamsunoro, carrying about 80,000 tons of fuel oil loaded in Iraq, exited the Strait of Hormuz and headed towards Fujairah, according to LSEG shipping data, Reuters reported.Other factors that may limit export growth include tight regional balances, limited scope for a sharp rise in refinery runs, and approaching peak summer demand, Jain said.HSFO is used in powering ships, generating electricity, and is also processed at refineries.The top three Middle Eastern HSFO exporters in June are Syria, Saudi Arabia and Oman, according to shipping data. Before the war, Iraq, Kuwait, Iran and the United Arab Emirates were among the leading exporters.Iraq began exporting fuel oil via Syria’s Baniyas port for the first time in March, with volumes reaching a record high of over 600,000 tons in June.“Iraq remains focused on diversifying export routes, with the Syrian corridor serving as a strategic alternative to Hormuz,” said FGE’s Jain.Before the Iran war, Iraq mainly exported fuel oil from the Khor al-Zubair port. The shift has involved millions of barrels of Iraqi fuel oil being trucked across Syria to Baniyas before being re-exported.Separately, Saudi Arabia is set to export over 300,000 tons of fuel oil in June, the highest in five months, from the Red Sea port of Yanbu, where it has redirected supplies.Fuel oil exports from Oman are also expected to reach nearly 300,000 tons in June, marking the highest level in more than two years.Meanwhile, trading sources expect Iranian fuel oil trade to remain constrained despite the interim peace deal’s 60-day US sanctions waiver, as banking and payment challenges are likely to continue acting as a key hurdle. Since the deal, oil prices have tumbled from the beyond $100 per barrel mark to the pre war levels of $70 per barrel.
