Natural Gas and Oil Forecast: Saudi Exports Recover as Hormuz Risks Persist

Although exports have increased, the amount of tanker traffic through the Strait of Hormuz has been very low. Only 12 tankers were seen traveling through the strait this past week. There are also many oil tankers that are not broadcasting their locations, so there may be a lot of oil being transported that is not showing up on satellite. According to some estimates, about 34 million barrels of oil were transported through the strait last week.

The costly workaround is being implemented by Gulf producers. Shuttle tankers and ship-to-ship transfers have increased, especially near Oman. Reuters has reported that the flows through the Strait of Hormuz have recovered to around 6.5 million barrels per day. However, logistics costs on certain routes have reportedly reached as high as $30 per barrel. With little to no progress on negotiations, the focus is on the U.N. meetings this week to gauge any potential breakthroughs. Rising diplomatic efforts have lessened some geopolitical concerns.

Natural Gas is expected to remain tight. QatarEnergy has stated its LNG output is a “very minute” volume. Without the resolution to the Hormuz situation, Qatar could further restrict LNG output and in turn delay the country’s infrastructure and LNG expansion projects.

With oil and LNG remains firmly tight, the US is expected to increase exports.

Fundamental bias: USOIL neutral-to-bullish, UKOil neutral-to-bullish, Natural Gas bullish.