US Energy Secretary Chris Wright said oil flows through the Strait of Hormuz had recovered to 80% to 90% of pre-conflict levels, averaging 13 million to 14 million barrels per day, while increased flows through alternative pipelines had helped support global supplies. Speaking via video link at the WPC Energy Congress, Wright said spare production capacity and substantial inventories had helped keep crude oil supplies at manageable levels despite ongoing challenges. The crude oil supply problem was largely under control, but not fully resolved, he said. The bigger challenge was refined petroleum product flows out of the Arabian Gulf, which remained at just 25% to 35% of pre-conflict levels, worsening shortages of diesel, jet fuel and gasoline. Refined product shortages add to market pressures Wright said the decline in Gulf refined product exports coincided with lower supplies from other sources. Russia, once a major diesel supplier, had become a net importer, albeit in limited volumes. China had sharply cut refined product exports and announced it would not export such products in October, adding to pressure on global markets, he said. Wright expressed hope that increased output from Chinese refineries, which have spare capacity and are benefiting from attractive profit margins, would help ease shortages. US refineries were also processing crude and producing refined products at record levels, he added. He said the course of the Russia-Ukraine war and China's policy on refined product exports would affect supply in the coming period. Shipping constraints hamper supply recovery Wright said maritime shipping was another factor complicating the recovery in refined product flows from the Gulf, citing higher transport costs and longer shipping routes. Houthi disruptions in the Bab al-Mandab Strait had forced oil tankers to take longer routes, while shifts in supply sources and Iranian attacks on vessels had added pressure on available shipping capacity, he said. A decline in Iranian, Venezuelan and Russian oil flows through channels that had used the so-called “dark fleet” had freed up a significant number of tankers previously used to transport those supplies, Wright added. Some of those vessels needed to be reintegrated into the mainstream shipping system, with sanctions lifted where possible, to increase capacity for transporting refined products from the Gulf and support continued oil and gas operations, he said. Diesel and jet fuel prices rise Wright warned that higher shipping costs were having a greater impact on markets farther from supply sources. Global diesel prices had reached very high levels, while jet fuel prices had also risen, alongside a more moderate increase in gasoline prices. Spare production capacity and inventories had helped contain pressure on the crude oil market, he said, but shortages of refined products and constraints on maritime shipping continued to pose challenges. Wright concluded that the response to the conflict had demonstrated the energy system's ability to adapt, but stressed that the crisis was not over and that continued efforts were needed to maintain stable supplies.
