⦿ Executive Snapshot

• What: Two VLCCs carrying a combined 4 million barrels of Gulf crude navigated the Strait of Hormuz with transponders switched off to avoid Iranian attacks.
• Who: The tankers involved are the Basrah Energy and Kiara M, with operations linked to ADNOC and its buyers.
• Why it matters: This event highlights the significant disruptions in Gulf oil transit due to the ongoing Middle East conflict, impacting global oil supply dynamics.

⦿ Key Developments

• The VLCC Basrah Energy loaded 2 million barrels of Upper Zakum crude at ADNOC's Zirku terminal on May 1 and exited the Strait of Hormuz on May 6 with its tracker switched off, according to Kpler shipping data reported by Reuters.
• The Panama-flagged vessel, owned and managed by Sinokor, offloaded its cargo at Fujairah Oil Tanker Terminals on May 8, per the Kpler data.
• A second VLCC, the Kiara M, exited the Gulf on Sunday with its transponder switched off, carrying 2 million barrels of Iraqi crude, per Kpler data.
• The destination of the San Marino-flagged Kiara M was not immediately clear, according to Reuters.
• ADNOC and its buyers have been sailing multiple tankers through the strait in an effort to move crude stranded in the Gulf by the ongoing Middle East conflict, per Reuters.

⦿ Strategic Context

• The Strait of Hormuz typically facilitates the transit of approximately 20 million barrels of crude per day, making the movement of 4 million barrels across two vessels a stark indicator of the supply crisis.
• The ongoing Middle East conflict has significantly disrupted normal shipping activity, compelling companies like ADNOC to adopt unconventional tactics such as disabling transponders to ensure safe passage.

⦿ Strategic Implications

• The immediate consequence is a heightened geopolitical risk premium in crude prices, as the limited transit capability exacerbates supply concerns in the global oil market.
• Long-term implications may include increased operational costs and logistical complexities for oil transport, as well as potential shifts in shipping strategies in response to ongoing regional instability.

⦿ Risks & Constraints

• The tactic of turning off transponders presents navigational and safety risks, complicating maritime coordination and increasing insurance costs.
• Continued geopolitical tensions and the threat of Iranian attacks remain significant risks, potentially deterring further shipping activities through the Strait of Hormuz.

⦿ Watchlist / Forward Signals

• Future developments that could signal a change include any easing of tensions in the Middle East, which might allow for open transit through the strait.
• Monitoring of shipping volumes and patterns in the region will be crucial to assess whether the current dark-shipping trend can evolve into a more stable operational environment.