Gulf Oil Leak: How Crude Is Escaping the Strait of Hormuz

The United States Oil Fund (AMEX:USO) traded at 130.66 dollars on August 19, up 0.28 percent on the day, sitting comfortably inside its 52 week range of 102.42 to 142.33 with a relative strength reading of 57.56. That modest daily gain belies a much messier story unfolding beneath the surface: a scramble around the Strait of Hormuz that has turned tanker shipping into one of the most lucrative trades in the oil market and left traders bracing for the possibility of a genuine gulf oil leak in the world's most sensitive chokepoint.

At a Glance

• USO trades at 130.66 dollars, up 0.28 percent, within a 52 week band of 102.42 to 142.33
• VLCC freight rates for Middle East to China voyages have blown past 500,000 dollars per day
• Saudi Aramco is quietly moving crude around Hormuz via ship to ship transfers off Fujairah
• ICE Brent has climbed to about 91 dollars a barrel on renewed US Iran tension
• US diesel cracks hit a record 102 dollars a barrel as distillate stocks fall to 1996 lows

Why Tanker Traffic Through Hormuz Has Slowed to a Trickle

Only a handful of vessels are still crossing the strait each day. Monday saw six commodity carriers pass through, up slightly from three on Saturday and two on Sunday, but notably absent were any VLCCs or LNG tankers. That absence tells its own story. With the 60 day memorandum of understanding between Washington and Tehran now expired and no new talks scheduled, according to a Tuesday post from President Trump, shipowners are treating the strait as a corridor to avoid rather than use.

China's two largest tanker operators, COSCO and CMES, have effectively pulled their combined fleet of more than 100 VLCCs out of both Hormuz and the Bab el Mandeb Strait near Yemen. Instead of sailing into the Gulf, those ships are now positioning off Fujairah and Oman to pick up crude that has already been moved out by other means.

The Fujairah Workaround and Its Price Tag

Saudi Aramco has resumed loadings at its Ras Tanura terminal and is arranging cargoes privately, without brokers, to avoid drawing attention to vessels transiting the strait. Sinokor loaded at least three VLCCs last week, the Malaysia Prosperity, Algeria Prosperity and Singapore Prosperity, and transferred that Saudi crude to Asian buyers via ship to ship operations off Fujairah in the United Arab Emirates.

The cost of doing business this way has become extraordinary. A VLCC voyage carrying cargo that actually passes inside Hormuz is now fixing at roughly 31 million dollars, illustrated by the Mongolia Prosperity supertanker's contract this week. Freight assessors put Middle East to China earnings north of 500,000 dollars per day, even as the pool of available empty tankers has shrunk to its tightest level in five years, with 372 supertankers currently loaded against 592 still in ballast.

Aramco is not alone in adapting. Riyadh is also offering Arab Medium and Heavy grades through the same Fujairah ship to ship method so September cargoes reach Asian refiners without a single tanker entering the strait itself.

What a Wider Conflict Could Mean for a Gulf Oil Leak Scenario

Trump's warning that the US could bomb Oman, paired with his acknowledgment that no US Iran talks are currently scheduled, has pushed ICE Brent up to around 91 dollars a barrel. Oman is the one government still reporting any progress toward a workable shipping arrangement in the Gulf, which makes the threat notable. Iran, for its part, has promised a

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