More Oil is Flowing Through the Persian Gulf Than Before the War. Prices are Still High.

A new report detailed that oil exports from the Persian Gulf have surpassed levels recorded before the Iran war. But other factors, like sky-high tensions in the region, as well as increased freight costs resulting from ensuing dangers, are keeping prices elevated.

Brent crude, the international benchmark, edged up 0.06% and clocked in at $108.86 per barrel at 2:33 p.m. ET, while West Texas Intermediate, the U.S. benchmark, fell 0.66% and stood at $97.17 at the same time.

Citing data from ship-tracking company Kpler, The Wall Street Journal noted that Middle East oil flows through Hormuz and alternative regional routes averaged more than 24 million barrels daily during the week ended October 18. That compared with he prewar average of 23.3 million barrels.

However, traffic through the Hormuz Strait itself remains below its previous level. Preliminary Kpler figures put flows through the strait, including offshore transfers in the Gulf of Oman, at approximately 14 million barrels daily, equivalent to 82% of prewar volumes.

The broader rebound reflects an expanding network of routes and shipping arrangements that has reduced Iran's ability to interrupt its neighbors' exports, even as vessels face serious danger.

Saudi and Emirati pipelines have helped redirect supplies. In September, approximately 40% of non-Iranian crude leaving the Gulf bypassed Hormuz, compared with 17% before the war.

At sea, some tankers operate as shuttles, collecting oil inside the Gulf and carrying it through Hormuz before transferring cargoes to other vessels near Oman. Those receiving ships then transport the oil to distant markets. American air cover offers some protection along the Omani coast. Tankers frequently switch off their tracking signals during crossings.

Large potential returns help explain why owners accept the risks. Kpler analyst Homayoun Falakshahi estimated that reselling Iraqi crude can generate an additional $20 per barrel compared with before the war, equivalent to approximately $40 million for a supertanker cargo.

Those earnings have attracted older vessels previously used to transport Venezuelan and Russian oil. Sailors, meanwhile, have been offered substantial bonuses, including as much as $25,000 for a round trip lasting one or two weeks, according to earlier Journal reporting.

The risks are helping drive prices up. A supertanker traveling from the U.S. Gulf Coast to China was reportedly chartered for $76 million earlier this month, roughly 10 times the cost of a comparable voyage less than a year earlier.

The vessel, a very large crude carrier capable of transporting approximately 2 million barrels, would incur shipping expenses of about $38 a barrel at that charter price before accounting for the cost of the crude itself.

Another tanker traveling from the United States to South Korea was reportedly booked for $77 million, according to CNBC. The unusually expensive voyages illustrate how the cost of buying and delivering physical oil can differ from benchmark prices displayed on financial markets.