Middle Eastern Oil Producers Flip Script on Iran
On the afternoon of July 25, the Greek-owned supertanker Kiku docked at Qatar’s Mesaieed oil export terminal, a massive, 30-berth port on the country’s west coast, 25 miles south of Doha. Four days later, loaded with crude oil, the Kiku passed through the Strait of Hormuz. The Very Large Crude Carrier – the largest oil tanker class, stretching over 1,000 feet – maintained a steady pace of 13 knots across the Persian Gulf, near its top speed.
Then, on July 31, shortly after 2 pm just off the coast of Dubai, the Kiku vanished. The vessel had switched off its AIS transponder, a marine radio device that broadcasts a ship’s identity, speed, course and position. To tracking services that monitor worldwide maritime traffic, it was as if the Kiku simply disappeared.
US-Military-Escorted Nighttime Transits
The Kiku’s disappearance was part of the oil industry’s latest tactic – “dark,” US-military-escorted nighttime transits across the strait. The aim: Avoid Iranian drone attacks – like the one that struck the Kiku a month earlier, but failed to explode. Aided by the US Navy, Saudi, Kuwaiti, Qatari and Emirati oil companies have chartered oil tankers to turn their transponders off and shuttle oil out of the Persian Gulf, through the Strait of Hormuz, to the Gulf of Oman, where they offload their crude to waiting tankers owned by their customers and then head back through the strait.
That has taken the costly burden of insurance risk and physical danger of Iranian attacks away from commercial shippers and placed it on the US government and the oil producers themselves. It has become an effective strategy, according to the US Department of Energy, which says oil traffic through the Strait of Hormuz has averaged between 8 million and 9 million barrels per day. That’s a meaningful amount of crude – roughly double what Wall Street oil analysts and shipping trackers like Kpler, using transponder data, would suggest.
Shadow Fleet Grows to 600 Vessels
The clandestine transits have changed the game for the Middle Eastern oil industry. CNN has observed more than a dozen ship-to-ship transfers in the Gulf of Oman over two days, with tankers moving on to destinations such as China, Taiwan, South Korea, the Philippines, Vietnam and Thailand. It’s a dangerous and expensive gambit that offers some temporary relief to the oil market. But with permanent solutions – a negotiated end to the war and lasting plan for the strait – remaining elusive, this workaround buys time.
Regional Conflict Disrupts Oil Market
The increase in dark transits like the Kiku’s recent journey comes at a crucial time for the energy market. The war, lasting far longer than many had imagined, has disrupted a fifth of the world’s oil supply for six months but reached an inflection point in recent weeks: Billions of oil and fuel barrels in commercial stockpiles have vanished. US emergency reserves haven’t been this small since the early 1980s. China’s reliance on its massive oil inventory – a key factor in preventing $150 oil – won’t last forever. And bond market investors and voters are running out of patience with high prices.
Facing a nightmare scenario, Middle Eastern oil producers starting using their new strategy over the past several weeks. It’s not a perfect solution – the strait is famously narrow, just 23 miles wide. There aren’t many places to hide, and radar can still spot a ship even with its transponder off. Two ships belonging to the UAE were attacked this week.
But about 80% of traffic through the strait over the past two weeks has been “dark,” transiting around the coast of Oman, as far from Iran as possible, according to Kpler. Because of the regional conflict, some tracking data has been subject to GPS jamming, which can make it difficult to make assessments.
Like many ships using this new tactic, the Kiku reappeared a day after its transponder turned off while anchored near the Emirati port city of Fujairah. After its transponder started pinging again, the Kiku continued on its journey, eventually offloading its crude in Asia.
Original Article: How Middle Eastern oil producers flipped the script on Iran — Cnn