Oil prices are poised for a two-week advance, but traders are increasingly pricing in the risk of a supply glut as the back end of the futures curve reflects growing spare capacity. The market’s resilience stems from a combination of tactical workarounds around the Strait of Hormuz and a surge in non-OPEC production, according to analysis from Investing.com.
Gulf producers have significantly reduced their exposure to the Strait of Hormuz, a historically constrained chokepoint. Saudi Arabia is diverting up to 5–7 million barrels per day through its East-West Pipeline (Petroline) to the Red Sea port of Yanbu, with ongoing expansions targeting further capacity increases. The UAE has deployed its Habshan-Fujairah pipeline, which bypasses Hormuz entirely and currently handles 1.5–1.8 million bpd, while a network of shuttle tankers, ship-to-ship transfers, and vessels with disabled transponders is moving an estimated 4 million bpd to waiting very large crude carriers off Oman. These measures have kept more than 8–8.5 million bpd flowing despite regional tensions.
Longer-term infrastructure projects aim to further reduce Hormuz dependency. The UAE plans to double its bypass capacity to roughly 3.6 million bpd by 2027, while Saudi Arabia is expanding the East-West system by an additional 1–2 million bpd. Iraq is advancing the Haditha-Baniyas corridor to Syria and the Mediterranean, with U.S. involvement, and accelerating a pipeline to Jordan’s Aqaba port. Combined bypass capacity could reach 12–13 million bpd within a few years, though still short of the Strait’s historical 20 million bpd throughput.
U.S. oil production is also contributing to the supply surge. Weekly EIA data shows U.S. crude output at 13.809 million bpd for the week ended August 14, following a monthly record of 13.934 million bpd in April. The Permian Basin remains the primary driver, supported by longer laterals, productivity gains, and price volatility following regional disruptions. EIA’s latest outlook projects 2026 output averaging 13.8 million bpd, rising to 14.2 million bpd by 2027.
Venezuela’s output has recovered from under 1 million bpd late last year to approximately 1.2 million bpd, with a year-end target of 1.4 million bpd and long-term ambitions of 3 million bpd. However, infrastructure constraints—including aging ports, power outages, and dilapidated terminals—are limiting export growth. Tankers are reportedly waiting up to 30 days to load, a bottleneck exacerbated by the June 24 earthquakes that damaged coastal infrastructure. Despite a U.S.-backed export agreement allowing traders such as Vitol and Trafigura to ship over 140 million barrels of crude and fuel this year, PDVSA’s aging facilities remain a critical bottleneck.
The UAE has capitalized on regional instability by increasing production unconstrained after exiting OPEC in May, following decades of quota alignment. June output reached 3.8–4.1 million bpd, with exports rebounding to around 3.7 million bpd of crude and condensate using bypass routes and storage solutions. The country is targeting more than 5 million bpd of total liquids by next year.
Iraq is seeking higher OPEC quotas as it plans to raise production to between 8 million and 10 million bpd over the next six years, according to a delegation visit to Saudi Arabia. Meanwhile, Iran’s attempts to disrupt Strait traffic have had limited impact, with U.S. officials stating that naval control of the waterway remains intact and that American producers in Texas and Louisiana have offset supply risks.
