Analysis by CNN's David Goldman
(CNN) - The Gulf oil-producing countries - with significant support from the US Navy - are working to pass huge quantities of crude oil through the Strait of Hormuz, directly under Iran's eyes.
The average flows of oil and petroleum products through this vital waterway reached 13.1 million barrels per day during the past week, according to data from Kpler, a company specializing in tracking marine data.
This quantity represents just under 80% of the total 17.1 million barrels that crossed the strait daily before the outbreak of war.
In this regard, Matt Smith, director of commodity research at Kpler, said: “Given these large volumes crossing the Strait, it is clear that Iran is losing influence over it.”
This achievement is the result of a complex operation that includes shuttle operations under military protection, including a secret crossing - or what is known as a “dark crossing” (without electronic tracking) - through the strait. Which helped restore large flows of Middle Eastern oil during the past two months.
Adding to the recent increase in traffic in the strait is the return of the flow of Saudi oil, which had been diverted primarily towards the Red Sea, before the Houthis in Yemen - allies of Iran - launched an attack on the main Saudi oil pipeline, "East-West", earlier this month.
The fundamental question remains: How long can this status quo continue? The US military is devoting enormous resources to the region simply to ensure the passage of oil, while global inventories continue to decline to near their lowest operating levels, and fuel prices remain at or near record levels.
Meanwhile, Iran - backed into a corner - began to respond and try to regain the initiative.
The market is in a state of anticipation and tension
It seems that the oil market still has unlimited solutions and means to deliver oil to customers, despite the world being exposed to the largest supply shock ever.
Global oil inventories declined by about two billion barrels during the period of the Iran-related war - according to JP Morgan data - but the market withstood these challenges.
The market achieved this remarkable achievement through innovative solutions such as rerouting pipelines and military-backed shuttle service, as well as increased production from outside the Gulf region, and most important of all, a significant global decline in demand.
Oil prices are still high at worrying levels, but innovative solutions devised by the market have prevented the price of crude from approaching the record level it recorded in 2008.
However, the status quo in the Strait of Hormuz cannot last forever.
Oil is a tangible commodity, and eventually market forces will impose themselves. With withdrawal rates from crude oil stocks exceeding deposit rates, the market will eventually reach that critical point that has long been predicted and feared. This is the point at which stocks become insufficient to meet demand.
When that happens, oil prices will have to skyrocket to curb demand enough to keep the market balanced.
No one knows exactly when this will happen.
Natasha Caneva, head of global commodities strategy at JPMorgan, stopped trying to speculate on the matter. Caneva acknowledged - in a note to clients two weeks ago - saying: “For the first time since the outbreak of the conflict with Iran, we do not have a basic perception of the situation; we simply do not know how to model the final scenario.”
Caneva believes that the essence of the issue is no longer related to the duration of the war, but rather to the ability of the market to provide the actual quantities of oil requested by customers.
The two matters may be interconnected; In the absence of a real solution to the crisis in the Strait of Hormuz, the world will have to place its hopes on the resilience of market stocks.
Who cares?
These market mechanisms provide fertile material for economic theory and supply-and-demand analyses, but in practice they have had little impact on people's pocketbooks.
Oil prices have been hovering above $90 per barrel throughout the month, spending most of September above $100, and gasoline prices are approaching their highest levels recorded since the start of the war.
As for diesel - which is facing the repercussions of both the war with Iran and the Russian-Ukrainian war - its price exceeded the previous record earlier this month, bringing its price to well above $6 per gallon.
The fact that oil has not reached $150 (at least not yet) is of little consolation to Americans who have to spend $100 to fill their cars' gas tanks, or to companies that incur exorbitant fuel surcharges for deliveries and shipping.
In the absence of substantive new information, the market has moved in recent months based on the prospects of reaching a peace agreement, as US President Donald Trump’s repeated statements - throughout the war - about a possible and imminent agreement with Iran to reopen the Strait had a tremendous impact on oil prices. This effect far exceeds the effect of the actual movement of oil barrels on the ground.
But this situation changed somewhat earlier this month, when the Houthis bombed the Saudi oil pipeline (east-west), which led to a temporary halt to the flow of about 7 million barrels of oil towards the Red Sea. This is a quantity, more than half of which was diverted away from the Strait of Hormuz.
Oil prices approached the $110 per barrel barrier before Saudi Arabia revealed an alternative and innovative solution, as it demonstrated a remarkable ability to adapt to the situation and redirected the flow of oil to pass again through the Strait of Hormuz.
Meanwhile, satellite images on Sunday showed that all seven berths in two major ports - in Yanbu and Al-Mujaz - were open and operational.
According to Kepler, the East-West oil pipeline, located on the western coast of the Kingdom, indicates a return of its production to previous levels.
Can these quantities be maintained?
“The alternative solution appears to be successful at the present time, as long as Iran allows it,” Caneva said in her memorandum issued earlier this month.
Iran, unable to deliver its oil through the Strait due to the US naval blockade, and losing a major source of its economic influence, escalated its attacks on oil tankers crossing the Gulf.
“It is not surprising that attacks on oil tankers are becoming more common, as Iran seeks to deter crossings,” Smith noted. “We expect this situation to continue as Iran seeks to regain control of the strait.”
Thus, the oil market remains at a standstill: an increasing US military effort keeps the unsustainable status quo high, keeping prices high for companies and consumers.
