How much oil flows through the Strait of Hormuz each day? All are trying to solve the mystery, but come up with wildly divergent conclusions. This mystery is causing crude oil prices to rise at a higher rate than usual.

Benchmark Brent crude rose to over $100 per barrel on Wednesday, its highest price since July 24, after a new wave of Houthi attacks by Iran-backed forces on Saudi energy installations and a threat from Tehran that it would wage 'economic warfare' against the United States in response to escalating tensions surrounding Hormuz.

Amid U.S. blockades and Iranian competition, the narrow waterway connecting Iran and Oman is now at the center of "the conflict".

Before the outbreak of the war in February, the flow through the world's main energy artery was largely taken as a given. Although never perfect, flow estimations were remarkably accurate, even when accounting for Iran’s long-standing practice of turning off tanker transponders in order to avoid Western sanctions.

Hormuz is transiting roughly 20 million barrels of oil per day. This is equivalent to one-fifth the global oil consumption.

This certainty has vanished.

Today, armies analysts and increasingly sophisticated AI systems sift through vast streams to determine the amount of oil that is moving through this strait.

Satellite imagery is compared with port records, cargo drafts, loading schedules for tankers, refinery receipts, and vessel tracking data in order to reconstruct the movements that were previously monitored near-real time.

It has become more difficult to solve the problem because of the increase in "dark crosses," where tankers turn off their navigation and identification systems as they approach, transit or leave the strait. The picture has been further muddled by a request from the United States to commercial satellite companies to delay images of the Gulf.

No one can tell with certainty how much oil flows through Hormuz each day.

Iran's hold on the Strait of Hormuz is slipping. The tit-fortat exchange of military weapons has weakened Tehran's radar and strike capability near Hormuz. U.S. maritime corridors along Oman's coastline and demining operations by the United States have made it possible for more ships to enter and exit the Gulf.

How many vessels is the multi-billion dollar question?

CONFUSION REIGNS

The Trump administration's contradictory estimates have highlighted this uncertainty.

Energy Secretary Chris Wright stated on September 2, that on August 31, more than 17,000,000 barrels of oil were transported through the strait under the supervision of the U.S. 'Navy. This would be the highest amount recorded since the beginning the war.

The claim had traders and analysts scratching our heads. Ship-tracking company Kpler, using satellite imagery, transponder signal, port logs, and commercial shipping intelligence suggested more than a week after the event that only 6 million barrels may have crossed Hormuz on that particular day.

Kpler estimates that crude oil flows through Hormuz averaged around 4.3 millions barrels per day in August, and increased to almost 5 million bpd for the first six of September. It also noted that transits appeared to have dropped sharply in the recent days.

The administration may be including exports of the United Arab Emirates Fujairah Terminal, which is located outside the Strait and is supplied by Abu Dhabi bypass pipeline.

A single day's observations are not indicative of broader trends. Wright acknowledged this on Sunday, saying that the average flow through Hormuz was more than 9,000,000 bpd. He did not specify a time period. This would match Kpler’s estimates when exports are combined with Hormuz flow and other routes around the strait.

Tankers can be dark for weeks or even days before and after crossing the Strait. This means that actual volumes may end up being higher than estimates.

It is possible that the new Hormuz will carry half or more of its pre-war volume.

This caveat reveals the larger problem.

Price of Uncertainty

Participants cannot accurately measure the flow of energy through the world's largest energy corridor. This is perhaps the first instance in the modern history of the oil market.

The implications go far beyond the academic debates about tanker movements. The fundamentals of oil prices should be reflected in the price. It is hard to judge fundamentals when the largest supply route in the world has disappeared.

In effect, the uncertainty has itself become fundamental.

This will likely result in a risk premium which is embedded into prices for several months.

Clarity will only improve with a resolution of the U.S./Iran standoff. It is not clear whether a resolution will be reached soon or in the future.

Iran's economy is suffering after months of conflict, particularly?since Washington imposed sanctions and a blockade against Iranian exports in July.

Trump's administration is likely to try to use economic pain as a way to get Tehran to return to the table. But Iran's clerical leaders continue to demand sanctions relief, and hope that they can eventually collect fees from ships passing through the Strait.

Iran also retains its ability to disrupt maritime traffic. According to United Kingdom Maritime Trade Operations, Iran-linked forces targeted 27 vessels between early July and now. The Islamic Republic also promised to announce a new limited zone in the Gulf within days.

More uncertainty.

Philosophers have asked for centuries: Does a tree fall in a forest if nobody hears it?

On today's oil markets, the question is whether or not a tanker that crosses the Strait of Hormuz and nobody can see it can have an impact on global supply.

It is not obvious what the answer to this question is.

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(source: Reuters)