Piper Sandler global energy strategist Jan Stuart wrote in a note on Friday that the physical oil market is flashing major warning signs, including disrupted exports, depleted inventories, and an ongoing diesel shortage crisis, all converging ahead of stronger fourth-quarter demand.

Saudi Arabia's export squeeze is becoming a major problem. The kingdom's crude shipments remain halved as Iran-backed Houthis begin to dent Red Sea loadings while Persian Gulf shipments remain depressed. Houthis overnight seized Mokha in the Bab el-Mandeb Strait, suggesting commercial traffic could begin to drop.  

Some crude crosses Hormuz through "dark" tanker passages along the Omani channel. But the partial recovery has not restored regional exports: Middle Eastern crude loadings averaged 13.3 million barrels a day in the week through Sept. 9, with Stuart warning that the shortfall is roughly 5 million to 6 million barrels a day.

Stuart added more color on the current state of the Gulf energy market: 

The Flowing Oil Data Digest

Dire Straits, Choking Oil Exports Through Two of Three Mideast Waterways

Sure this is "not a war" but the oil market is rallying like it is: Futures gained ~$10/b on the week (so far); structure is exploding; physical markets in Asia are leading - and are most dependent on Mideast exports. And, adding insult to economic injury, surging crude oil values are barely compressing diesel margins.

Seems to us that oil markets began to price several deep problems: 

A) there are no easy, quick resolutions to the war in the Mideast or the one in Ukraine. 

B) tellingly, Washington hasn't claimed an "imminent deal" in weeks - ask us for color from conversations with DC insiders at our 12th Annual Piper Sandler Macro Conference. 

C) physical market behavior underscores that there are real supply deficits of crude oil, 3-4 mb/d, and traded diesel supply remains short too.

In vogue suddenly are Saudi troubles the Houthis have curtailed Red Sea crude oil loadings, while its Persian Gulf loadings remain moribund. Aggregate KSA crude oil exports have averaged barely 3 mb/d (less than half of 'normal') since late July. This week, Houthi attacks and military advances threaten a longer lasting choke-hold. Absolutely fascinating is that reportedly Pres Trump twice declined to assist MbS who, again reportedly, asked for him to bomb the Houthis.

Lastly, sentiment is turning on Q2 demand' destruction' that in fact that was more 'suppression' (i.e. it comes back again) and inventory depletion (i.e. unsustainable). Inside: market signals and loadings data.

2026 Brent: Spot Brent v Dubai pulling away

Shape of the Brent Futures Curve (month 1-6)

MARKET SIGNALS AND DATA TO WATCH – MIDEAST LOADINGS AND DIESEL SCARCITY

Things are tightening up in a hurry, as we approach peak seasonal demand in Q4 with far less inventory

Asia's refiners scramble to fill Q4 schedules …

• Much is made of "China buying again" we don't know if it is, but it strikes us that given historic diesel margins, every refiner that can run crude oil is buying to run At the margin, that means that even simple, hugely cost disadvantaged refiners will want more crude oil.
• And the easy to get at oil released during the MoU phase of the war on Iran - some 200-300 mbs worth - has been digested, nor is there nearly as much inventory left to draw on.
• Despite sustained relatively high crude oil exports through the SoH - or about 9 mb/d, total Mideast exports remain some 5 mb/d below normal judging from the latest daily loadings data, see p. 2.
• China's crude oil buying may have picked up, it was way too low (down >4mb/d to 7 mb/d). We model imports of 10 mb/d in Q4
• We think and model that China did not suppress its final oil product demand by that much and instead drew some 250+ mbs from its vast inventories. In an open-ended supply disruption no one (China included) can keep drawing down inventories.

Indicative Margins: ~2x normal on global supply shock diesel, rbob and the gross 3:2:1 margin v dated brent

Strength (=backwardation) in Key Crude Oil Markets (Futures contracts 2-7, $/b)

China's Crude Oil Inventory: Volume & import cover

WHAT FLOWS: MIDEAST OIL LOADINGS & TRANSITS, IMPLIED DEFICITS OF ~5 MB/D

For the record, since July 15th overt SoH crossings have been sharply reduced; but there is a more or less steady flow of dark passages through the Omani channel

• Mideast crude oil loadings averaged 13.3 mb/d (7 days ending September 9th). That's a post-MoU record.
• But traffic in the SoH is still far from normal
• And Saudi Red Sea flows remain below wartime par…

We compile tanker loadings (Petro-Logistics) and monitor refiner utilization (OilX et al).

• Mideast crude oil loadings are running about 6 mb/d below normal with SoH gains offset by Red Sea declines
• The market seems to have finally woken up about Red Sea issues - these involve the UAE, Oman and Saudi's Red Sea terminals. Latest: outside Hormuz is down ~3 mb/d from peak
• Add to that a deficit of some ~2-3 mb/d of NGLs and add to that deficit our guesstimate of some 3 mb/d of the roughly 5 mb/d of clean products that were exported from the Mideast and that will not run normally for a while yet …

Redirecting of flow through new-/expanded-pipes will take anywhere from 1-2 yrs (UAE & Saudi) to from 3+ yrs to never

Mideast loadings rise to 13.3 mb/d Based on daily tracking

Mideast Port Loading Deltas of Crude Oil + Cond.

To sum up, the partial recovery in Hormuz flows has not resolved the physical supply deficit, while new pressure on Red Sea exports is derailing the critical alternative route. With inventories depleted and fourth-quarter demand approaching, the market has less capacity to absorb further disruption, leaving crude and diesel prices vulnerable to even higher prices. 

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