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Gulf Oil Supply Losses Appear Less Severe Than Early Market Estimates

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Crude prices have fallen below $90 per barrel as Gulf oil exports continue at stronger levels than many initially expected, Reuters said in a Friday report.

When Iran declared the Strait of Hormuz closed, early estimates suggested that 12 million to 15 million b/d of non-Iranian Gulf exports could be disrupted, raising fears of a historic supply shock.

Those concerns pushed Brent crude futures close to $120/bbl in early March, while some analysts warned prices could eventually reach $200/bbl.

Export activity became difficult to track as tankers delayed voyages, satellite coverage over the Gulf became restricted, and some vessels obscured their locations, according to the report.

More recent shipping data has shown that crude oil continued to leave the region, helping to explain why oil prices retreated despite the ongoing conflict.

US President Donald Trump said Wednesday that more than 100 million barrels had moved through the strait under what he described as a secret US operation to support tanker traffic.

Between the start of April and June 10, non-Iranian producers transported roughly 136 million barrels of crude through Gulf export corridors, equivalent to about 1.9 million b/d, the report added, citing Kpler data.

Kpler said producers restored flows after the initial disruption by expanding alternative transportation and export arrangements.

According to trading sources cited in the report, Iraq, Kuwait, and the UAE continued exporting crude on vessels operating without active tracking systems, while Saudi Arabia shipped about 4 million b/d to 5 million b/d from its Red Sea terminal at Yanbu.

The International Energy Agency estimated Gulf supply losses at 14 million b/d. However, sources at two major trading companies said internal calculations point to a smaller disruption of about 5 million b/d to 6 million b/d.

One source estimated Iraqi exports remain 2.5 million b/d to 3.0 million b/d below normal levels, while Kuwait is down about 1.5 million b/d. Saudi Arabia and the UAE each account for roughly 0.5 million b/d of lost supply.

Stronger US exports, a record 400-million-barrel emergency stock release, and weaker Chinese demand have further softened the market impact.

After accounting for lower Chinese consumption, one source estimated the effective supply gap at around 2 million b/d.

SEB analyst Bjarne Schieldrop said oil's retreat from March and April highs indicates global supply remains sufficient as markets adjust to the shock.

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