French oil major TotalEnergies is profitably moving oil through the Strait of Hormuz, with higher transport costs more than offset by steep discounts from crude producers, its CEO said at a Norwegian energy conference on Monday.
"We are today probably the largest trader of oil from Iraq ... and I can tell you that today crude oil is moving through the Strait of Hormuz very quietly, not publicly," said CEO Patrick Pouyanne.
The Strait of Hormuz, previously a key transit route for a fifth of global oil and LNG supplies, has been paralysed during the US and Israeli war with Iran owing to threats of bombing and mines.
Pouyanne and others have called for investment in alternative routes for oil to leave the Middle East, but the TotalEnergies boss said on Monday that the route remains profitable for those who can find ship owners willing to cross the strait.
"Crude oil is sold to you at $50, $60 per barrel, not the Brent price, because the producers are desperate to push their oil into the market," Pouyanne said.
Brent crude futures were above $90 a barrel on Monday.
"It costs more or less $20mn to move a VLCC (very large crude carrier) through Hormuz and come back... divided by 2mn barrels of oil, that's an extra $10 a barrel," the CEO added.
The same was not true for refined oil products because of smaller capacity of those ships, resulting in an unsustainable $50 a barrel surcharge for transport.
"That's why you don't have a single tanker of products moving out of Hormuz... So you have today a lack of oil products. That's why you have a bearish crude oil market and a very bullish products market, which is very strange," Pouyanne said.
TotalEnergies still plans to invest in alternative routes.
"We will become partners of the pipeline moving from Baghdad to Syria, but I will also invest in Abu Dhabi, in doubling the Fujairah pipeline," Pouyanne said.
The existing Abu Dhabi Crude Oil Pipeline, also known as the Habshan-Fujairah pipeline, can carry up to 1.8mn barrels per day and has proved crucial as the United Arab Emirates seeks to maximise exports from the Gulf of Oman coast, just outside Hormuz.
The UAE hopes to double that export capacity by next year.
