Three chokepoint closures threaten quarter of global oil supply

Russian diesel exports halved as refineries knocked offline

The simultaneous closure of three maritime chokepoints — the Strait of Hormuz, the Bab al-Mandeb strait and the Black Sea — is imperiling roughly a quarter of the world’s oil supply at a time when global oil reserves have fallen to their lowest levels in decades, according to a Wall Street Journal analysis published Wednesday.

Conflict in the Middle East broadened this week as Iranian-backed Houthi militants turned tankers back from the Bab al-Mandeb strait, which before the war accounted for about 12% of global seaborne oil flows, the Journal reported. A senior Houthi official, Hizam al-Assad, said on X that attempts to bypass restrictions by shipping oil through the Mediterranean was “nothing short of utter stupidity.” He implied the group could target Saudi oil-production facilities, saying “the next steps could involve shutting off the tap altogether.”

In the Black Sea, Ukraine mounted sustained attacks on Russian energy infrastructure and ships. A barrage of strikes near the port of Novorossiysk, which handles nearly a third of Russia’s oil exports, paused flows through a pipeline carrying crude from Russia and Kazakhstan. Four ships sustained damage, including a tanker chartered by Chevron and owned by Greek shipper Aristidis Alafouzos. He described the attacks as “a systematic threat to the arteries of the world’s energy supply and to the safety of those who keep them flowing.”

U.S. crude oil inventories fell by 3 million barrels in the week ended July 17 to their lowest level since the Reagan administration, the Journal reported. Government-controlled inventories in the Organization for Economic Cooperation and Development dropped another 44 million barrels in June to their lowest since December 1990. “The large strategic stock releases earlier in the conflict have meaningfully depleted the buffer available for any future disruption,” said Mick Strautmann, a market analyst at ship tracker Vortexa.

Crude oil prices jumped above $95 a barrel on Wednesday for the first time since June 10, the Journal reported. The real cost is being felt in refined products. U.S. gasoline prices rose above $4 a gallon this week. The gap between crude and diesel prices — known as the crack spread — has widened to its highest in years in Europe and the United States.

“There isn’t enough refining capacity running to turn the available crude into product — which keeps a lid on crude, and at the same time leaves product markets scrambling,” analysts at Morgan Stanley said.

Russia’s ability to supply diesel has been severely curtailed. Ukrainian drone strikes have hit every one of the country’s largest refineries at some point this year, said Isabelle Gilks, principal analyst of retail fuels at energy consulting firm Wood Mackenzie. More than a third of Russian refining capacity has been knocked offline, and diesel exports have fallen to around half the level at the same time last year, Gilks said. She added that repairs are likely to be slow because sanctions make it hard to source replacement parts and specialists.

Russian crude-processing rates have fallen to their lowest in more than two decades, averaging less than 4 million barrels a day this month, according to figures from EA Analytics. After long lines formed at gas stations, Russia banned exports of diesel on July 8 through the end of the month, the Journal reported.

The re-closing of the Persian Gulf has also set back efforts to resupply the world’s fuel reserves. Unlike crude exports, which can be partially rerouted through pipelines to the Red Sea or the Gulf of Oman, refined products exports have few alternatives to the Strait of Hormuz, analysts said.

The disruptions have benefited shipowners, who are chartering out vessels at high rates. When the Bab al-Mandeb strait is completely shut, vessels bound for Asia must take a massive detour north through the Suez Canal, west through the Strait of Gibraltar and then south around the Cape of Good Hope, adding 10 to 15 days of journey time, according to ship tracker Kpler. Fully loaded very large crude carriers sit too deep to pass through the Suez Canal, forcing shippers to operate supertankers on partial loads.