Gulf Crude Exports Recover to 91% of Pre-War, but Fuels Lag at 60%, and Vitol's CEO Calls It a Products and Shipping Crisis

Brent (December) $98.12 | WTI (November) $87.43

Brent -$2.20, WTI -$2.00. ICE October gasoil fell as much as 5.3% after Interfax reported Russia may lift its diesel export ban for some producers in October, and the gasoil crack lost as much as $5.56 a barrel. Gulf oil flows excluding Iran rose to over 81% of pre-war levels in September, while Iranian exports fell to zero under the US blockade.

Bottom Line The September export data show the recovery is lopsided. Vortexa puts crude and condensate flows from the Gulf at 91% of their pre-war level of 16.3 million bpd, while refined fuels including LPG are at 60% of 7.3 million bpd. Total flows from Saudi Arabia, Kuwait, Qatar, Oman, Bahrain, Iraq and the UAE averaged 19.2 million bpd, against about 23.6 million bpd in the year before the war. Kpler shows crude and condensate exports from the wider region at 14.7 million bpd in September, up from 10.8 million in August. Saudi Arabia drove all of that gain and more, adding about 4.2 million bpd to reach 6.6 million, while exports from Kuwait and Qatar declined and the UAE and Iraq rose. The product shortfall is the reason diesel and jet fuel prices have stayed near records while crude eased. Vortexa's Claire Jungman said daily flows are far more volatile than before the war, so the open question is whether September's levels can be sustained.

Vitol CEO Russell Hardy described the sequence in one line: the Middle East crude crisis has become a refined products crisis and is now a shipping crisis. He said about 12 million bpd of crude and 2 million bpd of products left the Middle East over the past week to ten days, and that 10 to 14 million bpd is needed to stabilize the market and avoid inventory draws, since stocks in the West are limited. Without that, he said, prices could reach $200. He called ship-to-ship transfers in the Gulf of Oman highly inefficient for moving this oil, said a large portion of Middle East transits are without AIS, and put Middle East LNG production at around 25% of capacity. Vitol is still working to understand the details of the G7's 100 million barrel release, which echoes the open question on how much of that volume is new supply.

Russian diesel moved gasoil today. Interfax, citing unnamed people, reported that authorities are considering exempting some producers from the export ban during October to avoid overstocking. Russia had extended the ban on most diesel exports through October 31 to protect domestic supply. This is an unconfirmed report and nothing has been announced, but the market reacted quickly: the drop in the gasoil crack shows how much of the current price rests on the assumption that Russian barrels stay off the market. Ukraine has said it will keep hitting Russian refineries, which makes a durable Russian supply recovery harder to count on.

On Saudi supply, Energy Minister Prince Abdulaziz bin Salman said oil pumped through the East-West Pipeline had reached 5.8 million barrels as of Tuesday morning. That figure is cumulative volume since the restart, not a daily rate. A source told Reuters on Monday that flows had not been interrupted, after media reports of a disruption. Kuwait said it is producing at 75% of pre-war levels, per ING, which read that along with Saudi Arabia's price cuts as a sign the supply picture is improving.

Yemen remains the risk to that picture. The Yemeni government said Saudi-backed forces advanced Monday to retake the coast around the Bab el-Mandeb Strait up to the city of Mocha, which the market read as easing risk to Red Sea supply. Fighting continues on the Saudi side of the border: two attacks on Monday evening hit the airports at Jazan and Najran, injuring three people and causing limited damage, according to Saudi aviation authorities. Neither airport is an oil facility, but the attacks show the Saudi-Houthi conflict is still escalating.

Diesel politics are intensifying in Washington. Trump signed an executive order Monday that defers the federal excise tax on on-road use of dyed diesel through the end of the year without interest or penalties, and directs officials to explore eliminating the deferred taxes. The order also waives the off-road requirement so anyone can buy red-dye diesel, and asks the agriculture secretary to ensure farmers have access in high-demand areas. Diesel set a record near $6.50 a gallon last month. Trump's approval rating held at a record-low 32% in a Reuters/Ipsos poll completed Monday, with cost of living the top concern, and midterms are November 3. Tax deferral changes who pays at the pump but does not add barrels to the market.