Oil Exports in the Middle East are Soaring, but Prices Are Still Well Above $100. Here’s Why.

Oil is flowing out of the Persian Gulf at volumes that have sometimes exceeded prewar levels, yet prices remain above $100 a barrel and consumers have yet to see any kind of relief at the pump.

Brent crude, the global benchmark, traded around $111 a barrel early Thursday. That puts prices near levels last reached in late April, when Gulf exports were roughly half their recent volume.

Natasha Kaneva, head of JPMorgan's global commodities strategy team, told The Wall Street Journal that she estimates Brent's fair value at $94 a barrel, considerably below its current price. But eight months into the Iran war, assessing oil's value has grown more complicated as traders weigh recovering exports against the threat of further military escalation.

For American drivers, those concerns translate into stubbornly expensive fuel. Regular gasoline averaged $4.25 a gallon Wednesday. Prices have declined in recent weeks but have generally remained above $4 since April, keeping pressure on household budgets despite the improvement in Gulf shipments.

One concern is what happens after next week's U.S. midterm elections. The Wall Street Journal reported that Washington has warned several Gulf Arab countries to prepare for a potentially short, intense military campaign against Iran. Renewed strikes could interrupt supplies again, undermining the export recovery.

Goldman Sachs estimates that the threat of fresh supply disruptions has added approximately $27 a barrel to Brent prices. Refiners are purchasing crude while they can obtain it, while investors are buying futures as protection against a possible energy shock.

The export rebound itself has also proved uneven. Persian Gulf shipments, including oil moving through the Strait of Hormuz and alternative routes, exceeded 24 million barrels daily in the week through Oct. 18, according to Kpler data cited by The Journal. That surpassed prewar exports of 23.3 million barrels a day.

By the week through October 26, however, shipments had fallen to at least 15.7 million barrels daily. Moving that oil remains dangerous and expensive. A record number of commercial shipping attacks near Hormuz this month has heightened risks for vessels and driven up insurance and freight expenses.

Exporters have increasingly depended on alternative pipelines and transfers between ships following attacks on tankers and infrastructure, including a crucial Saudi pipeline. Shipping crude from the Gulf to Asia cost almost $36 a barrel in early October, according to the International Energy Agency, more than five times the prewar cost.

Another potential disruption involves South Korean shipping company Sinokor. Iran's newly established Persian Gulf Strait Authority has threatened unspecified legal action against its vessels beginning November 1.

Kpler figures show that Sinokor ships represented more than one-fifth of confirmed, identified tanker traffic carrying crude and petroleum products through Hormuz over the past three months.

Meanwhile, the market has fewer reserves available to absorb another shock. The IEA's latest figures put readily accessible global on-land oil inventories near their lowest levels since at least 2016. Morgan Stanley analysts say total supply reaching the market, including deliveries to domestic refineries, remains below last year's levels despite recovering exports.

China is adding another source of pressure. Its sharp import reductions helped restrain prices earlier this year, but purchases have increased since June's low. Ship-tracking data indicate October imports rose from September.

With the world's largest crude importer buying more, inventories depleted and shipping vulnerable, stronger Gulf exports alone have been insufficient to pull prices below $100 a barrel or deliver sustained relief to consumers at the pump.