Why Is the Crude Cushion Shrinking?
The crude inventory buffer is shrinking because Atlantic Basin inflows are slowing while China is drawing down inventories at rates of up to approximately 1 million barrels per day (mb/d). According to Vortexa, China's extra crude buffer—accumulated since 2025—could be largely exhausted within four months if current draw rates persist.
"Everything looks very well supplied, but there is simply no warranty that it will happen in exactly the same way down the line," said David Welch, Chief Economist at Vortexa. "I do see increasing risk that the market could tighten significantly. That will not happen from today to tomorrow, but two or three months down the line, I think this is very well possible unless we see a significant turnaround in the geopolitical events."
How Are Hormuz Strait Disruptions Affecting Shipping Costs?
Hormuz Strait shipping route disruption costs are rising because the strait is not operating normally—it is operating selectively, with increasing operational workarounds that each carry a financial penalty.
"The key distinction is that the strait is not simply open or closed," explained Claire Jungman, Director of Maritime Risk and Intelligence at Vortexa. "It is operating selectively, and vessels that are crossing are increasingly doing so with limited visibility. We're seeing reduced visibility through Hormuz, greater reliance on ship-to-ship transfers and pipelines, longer alternative routes, and more crude accumulating near the end buyer. But each workaround introduces additional cost, delay, and operational risk."
The core disruption cost drivers identified by Vortexa include:
- Reduced transit visibility through the Strait of Hormuz
- Surge in ship-to-ship (STS) transfers, adding logistical complexity and counterparty risk
- Longer alternative routing, increasing voyage time and fuel costs
- Greater reliance on pipelines, which carry capacity constraints
- Crude accumulation near end buyers, tying up capital in floating storage
What Is Driving the Surge in Ship-to-Ship Transfers?
Ship-to-ship transfers have become a primary logistics tool in response to Hormuz Strait disruptions. In July 2026, 57% of Gulf crude exports involved a ship-to-ship transfer, compared with just 12% a year earlier. STS is no longer just a concealment tool—it has become the logistics backbone of Gulf crude trade.
"While absolute STS volumes reached an unprecedented level, the number of shuttle vessels may look relatively small, but their impact is significant," said Jungman. "A single VLCC can carry roughly 2 million barrels, so even a handful of crossings can materially support regional exports. Recent reports also suggest that a major UAE producer has added five VLCCs and chartered around 25 crude carriers, with some being used for shuttle movements and others for direct deliveries."
Vortexa analysts noted that as recently as the time of reporting, five dark crude ship-to-ship transfers were observed taking place in the Pujara transfer zone—underscoring how active and visible this activity remains.
Is STS Activity Still Limited to Sanctioned Trade?
No. Ship-to-ship transfer activity in the Gulf has traditionally been associated with sanctioned Iranian trade or efforts to disguise cargo origin. However, its growing use for mainstream UAE, Kuwaiti, and Iraqi barrels signals a fundamental shift.
"The UAE origin volumes are particularly important," said Jungman. "STS activity in the region has traditionally been associated with sanctioned Iranian trade or efforts to disguise cargo origin. Its growing use for the mainstream UAE barrels, as well as Kuwaiti and Iraqi, shows that it's becoming a much broader logistical tool."
While ferrying cargo to another vessel for a longer voyage may reduce the final carrier's direct exposure, Vortexa analysts note that it adds cost, time, counterparties, and documentation risk for all parties involved.
Are Gulf Crude Exports Returning to Normal?
No. While crude exports are continuing, Vortexa's assessment is clear: the barrels are moving, but normal shipping practices are not.
"The continued exports should not be interpreted as a return to normality. The barrels are moving, but normal shipping practices are not," said Jungman.
The new normal for oil trade in 2026 is one of adaptation—but adaptation at a cost. Gulf exporters are managing disruptions through dark transits, STS transfers, and pipeline rerouting, while Saudi and other Red Sea origin barrels face an additional variable: the Houthi announcement on July 20th that Saudi shipping would be targeted at Bab al-Mandab. This has prompted Red Sea crude to consider routing north rather than south.
Source: gCaptain — "Significant Shrinking in Crude Cushion In Coming Months" by Lori Ann LaRocco
