The role of shadow fleets in transporting oil out of the Strait of Hormuz

If, after all these months of uncertainty and instability in the Middle East, the price of oil has not once again soared towards $120 per barrel – a price that banks such as Goldman Sachs associate with a prolonged blockade of the Strait of Hormuz (which is now in place) – but instead remains just around $90, this is partly due to the ‘shadow flows’ through which Gulf countries continue to transport crude oil out of the strait (alongside the pipelines that bypass it and the use of global reserves, which have fallen by around 410 million barrels since the start of the war, according to the International Energy Agency). Before the conflict, around 20 million barrels a day passed through the Strait of Hormuz, whilst in recent days tracking services such as Kpler have recorded around 4 million barrels leaving the strait, and US Energy Secretary Chris Wright claimed last week on X that the weekly average leaving the strait was nearly 9 million barrels a day. On Sunday, however, Bloomberg revealed that, according to reliable sources, the actual volumes are believed to exceed the estimated 4 million barrels per day, due to transhipment carried out by ships travelling ‘under the radar’. In fact, to tranship oil cargoes, cargo ships cross the Strait of Hormuz with their transponders switched off – that is, without transmitting the signal that reveals the vessel’s position and identification – and once safely in the Gulf of Oman, they transfer the cargo to other tankers, which set off for Asia without ever having entered the war zone, whilst the first ships return to load up again (a method, therefore, not dissimilar to that used for years by Iran and Russia to circumvent the sanctions imposed on them). This can only mean that far more oil is leaving the Gulf than is generally realised.

The analytics firm Vortexa has estimated that in July alone, 57 per cent of Gulf crude oil exports involved ship-to-ship transfers, compared with 12 per cent a year earlier. By way of comparison, EU Sentinel-1 satellite images analysed by Bloomberg show around 150 oil tankers waiting off the coast of Oman, whereas in January there were around 40. According to Reuters, the UAE’s ADNOC alone has sold over 100 million barrels in this way through auctions and tenders.

Saudi Arabia, which has diverted crude oil via its pipeline to Yanbu on the Red Sea, has, however, encountered numerous problems in recent weeks. Houthi attacks have also made that route unsafe, to the extent that, according to Bloomberg, Asian refineries are struggling to find ships willing to load at Yanbu. Consequently, Riyadh has opted to change course, given that, according to yesterday’s reports, Aramco, the state-owned oil company, has also offered some Asian customers ‘Arab Medium’ and ‘Arab Heavy’ crude via ship-to-ship transfers off the coasts of Sohar and Fujairah, outside the Strait of Hormuz. How those barrels – which are loaded only at terminals within the Persian Gulf – have reached and will continue to reach those locations is perhaps no longer a mystery.

The balance, however, hinges on the decision by companies and shipowners to accept the risk of being targeted. ADNOC has recorded around twenty ships attacked by missiles and drones since the start of the conflict, resulting in twenty injuries and the death of one seafarer in July. The UAE also speaks of ‘acts of piracy’ by Iran, but ships continue to set sail. Kpler recorded just five ships passing through last weekend – five on Saturday and none on Sunday – compared with the 31 oil tankers tracked the previous weekend (a sign that perhaps more and more ships are now operating under the radar). In the Bab el-Mandeb Strait, however, attacks continue: the Houthis claimed responsibility yesterday for a new missile attack on a Saudi military vessel and its escorts. In any case, for the time being, alternative export methods have helped to keep the price per barrel in check and seem set to hold up until there are further developments in the Gulf. And this means that as long as there is a desire to meet the demand for oil, Gulf companies will have to continue to find ships and crews willing to sail under the radar, at the risk of being attacked.