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Lingering Dangers: Is the 2026 Energy Crunch Over?
1 Jul
Summary
- Crude oil tanker crossings through Hormuz are up but still below pre-war levels.
- Significant 'stuck production' exists in Gulf countries due to fears of not selling oil.
- The TD3C Index, a freight rate, remains well above its long-run average, signaling risk.
Brent crude prices have recently stabilized, suggesting the 2026 energy shock might be a temporary event. Traffic through the Strait of Hormuz has seen a significant increase following a recent ceasefire, with nearly 100 million barrels of oil being moved. However, transit levels for crude oil tankers are still considerably lower than pre-conflict figures, and overall vessel traffic has not returned to normal.
The physical oil market has experienced price volatility due to the sudden influx of supply. Yet, a significant risk persists for global oil markets: 'stuck production'. This refers to millions of barrels of potential daily supply from Gulf countries being held back due to concerns over sales. Experts estimate this curtailed production could be around 9 million barrels per day.
While some producers are eager to resume this shut-in production, challenges remain. Iraq's recent attempt to increase output was quickly scaled back due to insufficient tanker capacity for export. Shipping companies appear hesitant to transit the Strait of Hormuz, evidenced by the imbalance of vessels heading east versus west. This reluctance to enter the Strait empty for cargo pickup impacts the restoration of production.
Signs point to the 2026 energy crunch not being entirely resolved. The TD3C Index, which tracks the freight rate for shipping crude from the Middle East to China, has fallen but remains substantially higher than its long-term average. This elevated transport cost suggests that transit security risks persist, indicating a fragile market balance.
