Oil tanker movements through the Strait of Hormuz fell sharply on Thursday despite signs that crude flows through the strategic waterway have recovered to a substantial share of pre-war levels.
Preliminary Kpler data cited by Reuters showed that only seven commodity vessels crossed the Strait of Hormuz on Thursday, down from 17 vessels on Wednesday and below the 10-day average of 15 vessels.
Windward's tracking data provided a similar picture, recording six tankers crossing the waterway on Thursday. Four entered the strait while two exited, with three of the vessels operating in “dark mode” to avoid detection.
The weaker vessel traffic contrasts with estimates showing that oil volumes moving through the chokepoint have increased. Bloomberg reported that crude flows out of Hormuz had risen to between 6 million and 8 million barrels per day, based on estimates from traders.
Goldman Sachs separately estimated that oil flows through the strait had recovered to approximately two-thirds of pre-war levels, suggesting that the volume of crude being transported is considerably higher than the number of vessels currently visible in conventional shipping data would indicate.
ING commodity analysts also pointed to evidence that regional producers are adapting their trading patterns to the disruption. According to the analysts, more Persian Gulf producers are moving crude through Hormuz, while others are increasingly directing sales to destinations outside the waterway.
The divergence between vessel numbers and oil volumes indicates that the market is adjusting to the prolonged disruption by concentrating larger crude movements into fewer voyages and finding alternative routes where possible.
The recovery in oil flows has helped ease some concerns over an outright loss of Persian Gulf supplies. However, the broader shipping situation remains unsettled, with tanker movements still well below recent averages.
The decline in traffic also comes as expectations for renewed peace negotiations between Tehran and Washington weaken. ING's Warren Patterson and Ewa Manthey said the fading prospects for a resumption of talks are maintaining upward pressure on crude prices.
The Strait of Hormuz remains a critical route for global energy trade, meaning continued restrictions on shipping could keep a risk premium in oil prices even as physical crude flows gradually improve.
Meanwhile, developments in Venezuela are creating another potential variable for the global oil market. There is growing speculation that Venezuela could leave OPEC following the United States' increasing control over the country's oil industry.
An exit could eventually pave the way for higher Venezuelan production, but a rapid increase in output is unlikely. Years of declining production have weakened the country's oil industry, meaning Venezuela and its US partners would need time to restore capacity and reverse the long-term deterioration.
For now, the oil market is therefore balancing two opposing developments: improving crude flows through Hormuz and weakening expectations for a diplomatic breakthrough between Iran and the United States.