Energy This Week | The National

Hormuz is finally open, with the US and Iran in the early stages of talks which hopefully will lead to the free and unhindered flow of commerce and energy. However, the past week has shown that, despite a potential diplomatic breakthrough, all’s not well with regional energy. QatarEnergy’s planned restart to 50% of its liquefied natural gas production received a violent setback after a technical malfunction at the world’s largest LNG plant caused an explosion that left 13 dead and 66 injured. The impact of the energy crisis and the Iran war will leave us scarred for a very long time.

Last week, I wrote about how US sanctions architecture could evolve following the signing of the framework, and how waivers could be brought from the playbook to hold leverage over Iran as talks continued and peace held. On Monday, the US Treasury Department, in an unprecedented move, granted a waiver allowing Iran to sell its oil freely in the markets, including to the US for the first time in decades. This ends the US’s long-standing "maximum pressure" campaign to squeeze Iranian exports, giving Iran a major win. This follows the US issuing a waiver allowing wartime sales of Russian oil, allowing Urals to be freely traded, although this has now expired.

As Hormuz-facing exporters look to ramp up production quickly during these 60 days of détente, there has been no time in recent history when sanctioned barrels have been allowed to be traded so freely in the energy markets.

Iran’s long-sanctioned oil has gained legitimacy following the war. The embargoed barrels could also technically be sold to the US again after nearly 40 years. The Treasury's General Licence X, issued on Tuesday, authorises the sale and delivery of Iranian crude and clears dollar payments to Tehran and sanctioned entities through August 21. The waiver comes just as Iranian exports are scraping their lowest point in five years.

May exports collapsed to 329,000 bpd, down 78% from April and 85% below February's 2.2 million bpd, as the Hormuz blockade choked loadings.
June has rebounded to 565,000 bpd through June 23, a 72% jump. It is well short of the 1.68 million bpd Iran averaged across 2025.
Around 22 million barrels have shipped so far this month, nearly all of it to China, with sellers widening discounts to clear the cargo.
More than 80 energy sites were damaged in the war, so a return to the 2.5 million bpd peak of 2017 is challenging.

Bottom line: The headline promise of Iranian crude reaching US refiners is logistically near impossible inside the 60-day window. US refiners would only commit if the waiver is rolled over for longer than that.

While Washington opened the door for Tehran, it quietly let Moscow's slam shut. The US allowed General Licence 134C to lapse on June 17, ending the wartime relief that kept Russian seaborne oil flowing to cool prices. Russian revenue, though, has barely felt the pinch.

Russia exported six million bpd of crude in May, up from 4.9 million in February, earning roughly €726 million ($832 million)
India: purchases hit an all-time high of 2.35 million bpd in mid-June, according to Kpler, surpassing the May 2023 record
China: Beijing is shielding its teapot refiners with a blocking order against US sanctions. May seaborne imports fell, however, on refinery economics, not politics.
Turkey: Russia's third-largest buyer pulled back volumes to about 161,000 bpd as the Urals discount narrowed to an $82 average.

Bottom line: India and China are buying Russian oil regardless of a waiver expiry. Washington's leverage over Russia thins by the day as Moscow's revenues keep climbing.

Gulf exporters have 60 days to refill tankers and win back market share, but ramping output and getting barrels back to prewar levels are two very different problems. Exports are poised to come back gradually rather than all at once, with de-mining and unsettled transit terms keeping the risk alive, according to the International Energy Agency. Some producers have managed to get more supply out, and the difference in speed is entirely contingent on their geography.

The UAE: Exports rebounded to nearly 85% of prewar levels in early June, jumping to 4.3 million bpd from 1.9 million in March, helped by the Habshan-Fujairah pipeline
Saudi Arabia: Aramco lifted Yanbu exports on the Red Sea from 2 million bpd before the war to more than 5 million in early June
Kuwait: With no bypass pipeline, it was the hardest hit. Its output more than halved to 573,000 bpd in May, forcing it to cut to local needs and sell refined products around the Gulf.
Kuwait Petroleum Corporation now plans to lift production to two million bpd within a week and is in talks with Saudi Arabia and the UAE to plug into their pipeline networks.
Cumulative Middle East supply losses topped 1.3 billion barrels, with Hormuz flows collapsing from about 20 million bpd before the war to 2.7 million bpd across March to May. It is now back towards 12 million.
The IEA still sees global supply falling 3.9 million bpd this year to 102.4 million, with a full return to prewar levels unlikely before early 2027.

Bottom line: Producers who built infrastructure to bypass Hormuz are faring better. However, the International Energy Agency has warned that the conflict will leave lasting marks on the energy sector beyond 60 days.

Chart of the week

Brent oil in 2026. Isaac Arroyo / The National

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Big number

The cumulative oil supply lost from Middle East producers during the war, according to the IEA. Hormuz flows fell from about 20 million bpd before the conflict to 2.7 million across March to May.

A general licence is a blanket authorisation from the US Treasury's sanctions office that permits an otherwise prohibited activity, sparing each party the need to seek individual approval.