Gulf producers keep Hormuz ‘shuttle’ crude exports; volumes said to top pre-war levels
Version 2: A third outlet, the Seoul Economic Daily, adds new detail: provisional Kpler and Vortexa data indicating crude export volumes through the strait have recovered to or above pre-war levels, record September LNG flows, the shipowners leading the shuttle trade, and a Sept. 10 date for the drone strike on Saudi Arabia’s east-west pipeline.
In short
Gulf oil producers including Saudi Arabia are still exporting crude through the Strait of Hormuz via high-risk “shuttle” runs, loading very large crude carriers inside the strait and transferring the oil to ships waiting outside, according to a Wall Street Journal report relayed by Yonhap, the Kyunghyang Shinmun and the Seoul Economic Daily. Each operation costs $30 million to $40 million and adds about $15 to $20 per barrel, and seven ships have been attacked near the strait since Sept. 28. The Seoul Economic Daily, citing Kpler data, said export volumes have recovered above pre-war levels.
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Gulf oil producers including Saudi Arabia are continuing high-risk “shuttle” operations to export crude through the Strait of Hormuz despite Iranian military threats and repeated attacks on shipping, according to a Wall Street Journal report published Oct. 5 local time and relayed by Yonhap, the Kyunghyang Shinmun and the Seoul Economic Daily. Under the arrangement, very large crude carriers (VLCCs) sail inside the strait, load crude at a port and transfer the oil to another vessel waiting outside. [ 1 , 2 , 3 ]
Each operation costs $30 million to $40 million, or about 40.3 billion to 53.7 billion won, adding roughly $15 to $20 per barrel even before insurance, Yonhap and the Kyunghyang Shinmun reported. Yonhap and the Seoul Economic Daily said VLCC charter rates from the Gulf to China climbed from about $231,400 a day just before the war to more than $1.2 million a day in late September, while crews from India, the Philippines and China receive two to three times their usual pay and one crewing company offered a round-trip bonus of up to $25,000. Richard Matthews, a director at shipping broker E.A. Gibson, said the money paid to crews is “nothing” compared with the millions of dollars shipowners are earning, according to Yonhap and the Seoul Economic Daily. The Seoul Economic Daily said the freight share of shuttle costs is not precisely known. [ 1 , 2 , 3 ]
Risk remains high. According to UKMTO and others, seven ships have been attacked near the Strait of Hormuz since Sept. 28, a figure all three outlets carried. Yonhap reported that nine merchant ships were attacked near the strait over the past two weeks, with two crew members injured and one killed, and the Seoul Economic Daily said some of the ships hit were tankers on shuttle runs. Ships pass through the strait at night with windows covered and all lights off, using radar bearings and distances to islands and capes instead of GPS signals that could reveal their position, the outlets said. [ 1 , 2 , 3 ]
Despite the danger, the Seoul Economic Daily reported, citing provisional data from ship-tracking firm Kpler, that the seven-day average of crude exports through the strait was 18.3 million barrels a day as of Sept. 30, above the pre-war average of 18 million barrels a day, and that exports exceeded pre-war levels on 14 days in September. Shipping data provider Vortexa also said Gulf export volumes had recovered to pre-conflict levels, and liquefied natural gas cargo volumes through the strait in September reached their highest since February, the outlet reported. An unnamed specialist told the outlet that most of September’s increase in Middle East crude exports came from Saudi Arabia and that higher supply would help ease shortages for Asian refiners especially. [ 3 ]
All three outlets reported that Saudi Arabia’s east-west pipeline, which bypasses Hormuz and can carry up to 7 million barrels a day, was hit by a drone attack; the Seoul Economic Daily dated the strike to Sept. 10. Yonhap said exports through the pipeline have partly resumed but that capacity limits mean Saudi Arabia is likely to depend on shuttle operations for now, an assessment it attributed to analysts. The Seoul Economic Daily said the shuttle shipping market is led by a small number of shipowners including South Korea’s Sinokor and Dynacom, owned by Greek billionaire George Prokopiou, and that smaller owners — among them those of ageing vessels used for Venezuelan and Russian crude — have recently joined. [ 1 , 2 , 3 ]
Yonhap said the practice emerged after the outbreak of the US-Iran war, when oil buyers in Asia and elsewhere became reluctant to send their own ships into the Gulf. The Kyunghyang Shinmun described it as following a blockade of the Strait of Hormuz that has made free passage of large tankers difficult. [ 1 , 2 ]
Why it matters
The Strait of Hormuz is the main sea route for Gulf crude, so the shift to costlier, riskier shuttle runs affects global shipping costs and, ultimately, the price of oil far beyond the region. The documents describe the arrangement as a war-driven workaround in which producers weigh record transport bills and attacks on shipping against halting exports.
Key facts
- Gulf oil producers including Saudi Arabia are loading crude onto very large crude carriers inside the Strait of Hormuz and transferring it to vessels waiting outside, a practice the outlets call shuttle operations. [ 1 , 2 , 3 ]
- One shuttle operation costs $30 million to $40 million (about 40.3 billion to 53.7 billion won), adding roughly $15 to $20 per barrel excluding insurance. [ 1 , 2 , 3 ]
- Seven ships have been attacked near the Strait of Hormuz since Sept. 28, according to UKMTO and others. [ 1 , 2 , 3 ]
- Ships pass through the strait at night with windows covered and all lights off, using radar bearings to islands and capes instead of GPS. [ 1 , 2 ]
- VLCC charter rates from the Gulf to China rose from about $231,400 a day just before the war to more than $1.2 million a day in late September. [ 1 , 3 ]
- Crews from India, the Philippines and China are being paid two to three times normal wages, and one crewing company offered a round-trip bonus of up to $25,000. [ 1 , 3 ]
- Citing provisional Kpler data, the Seoul Economic Daily said the seven-day average of crude exports through the strait was 18.3 million barrels a day as of Sept. 30, above the pre-war average of 18 million barrels a day, and that exports topped pre-war levels on 14 days in September. [ 3 ]
- Saudi Arabia’s east-west pipeline, which bypasses Hormuz and can carry up to 7 million barrels a day, was hit by a drone attack; the Seoul Economic Daily dated the strike to Sept. 10. [ 1 , 2 , 3 ]
Confirmed by several sources
- Gulf oil producers including Saudi Arabia are continuing shuttle operations to export crude despite military threats. [ 1 , 2 , 3 ]
- A single shuttle operation costs $30 million to $40 million, adding about $15 to $20 per barrel excluding insurance. [ 1 , 2 , 3 ]
- Seven ships have been attacked near the Strait of Hormuz since Sept. 28, according to UKMTO and others. [ 1 , 2 , 3 ]
- Producers appear to judge that bearing the high transport costs is economically better than halting crude exports. [ 1 , 2 , 3 ]
- Ships cross the strait at night with windows covered and all lights off, navigating by radar rather than GPS. [ 1 , 2 ]
- Saudi Arabia’s east-west pipeline was hit by a drone attack and its operation was disrupted. [ 1 , 2 , 3 ]
Still unclear
- Nine merchant ships attacked near the strait over the past two weeks, with two crew injured and one killed. Reported only by Yonhap, which cites UKMTO and others; the other two outlets give only the seven-ship figure since Sept. 28.
- Crude and LNG export volumes through the strait have recovered to or above pre-war levels. Reported only by the Seoul Economic Daily, which cites provisional Kpler data and Vortexa; Kpler’s figures are described as provisional.
- South Korea’s Sinokor and Greece’s Dynacom, owned by George Prokopiou, lead the shuttle shipping market, with smaller owners of ageing vessels recently joining. Stated only by the Seoul Economic Daily, which attributes it to the Wall Street Journal; the other outlets do not name shipowners.
- Whether the Strait of Hormuz is blockaded or merely restricted. The Kyunghyang Shinmun refers to a blockade limiting free passage of large tankers, while Yonhap attributes the shuttle practice to the US-Iran war and buyers’ reluctance to send ships into the Gulf.
- Who carried out the attacks on shipping and on the east-west pipeline. None of the documents names a perpetrator.
- The exact share of tanker freight in total shuttle costs. The Seoul Economic Daily says the freight share is not precisely known.
- Whether Saudi Arabia will keep relying on shuttle operations and for how long. Yonhap reports this only as an assessment by unnamed analysts, with no decision or timeframe stated.
What local media are saying
Timeline, local time
- Saudi Arabia’s east-west pipeline, which bypasses the Strait of Hormuz, is hit by a drone attack, according to the Seoul Economic Daily; Yonhap and the Kyunghyang Shinmun say only that the strike happened last month. [ 1 , 2 , 3 ]
- Start of the period in which seven ships have been attacked near the Strait of Hormuz, per UKMTO and others. [ 1 , 2 , 3 ]
- Seven-day average crude exports through the strait stand at 18.3 million barrels a day, per provisional Kpler data cited by the Seoul Economic Daily. [ 3 ]
- VLCC charter rates from the Gulf to China exceed $1.2 million a day, up from about $231,400 a day before the war. [ 1 , 3 ]
- The Wall Street Journal publishes its report on Gulf shuttle operations, according to Yonhap, the Kyunghyang Shinmun and the Seoul Economic Daily. [ 1 , 2 , 3 ]
- Yonhap publishes its report from New York. [ 1 ]
- The Kyunghyang Shinmun publishes its report. [ 2 ]
- The Seoul Economic Daily publishes its report. [ 3 ]