Panama Canal transit costs have surged to record levels as falling water levels and a spike in rerouted energy shipments tighten capacity at one of the world's most important trade chokepoints. The highest single auction price for a canal crossing has reached $3.78 million, while Argus said the average daily auction price for a daytime transit slot at the regular locks is about $1.1 million so far this month, more than sixteen times the level seen in the same period last year. The pressure comes from two directions: El Niño-driven drought has pushed Gatun Lake, the canal's main water source, to critically low levels, while the closure of the Strait of Hormuz (Middle East oil shipping chokepoint) has forced Asian buyers to source more crude and refined products from the U.S. Gulf Coast, adding traffic that also depends on the canal. The Panama Canal Authority has imposed a series of draft restrictions, including a cut in allowable Panamax lock draft to 47.5 feet from the usual 50 feet by September 3. Shallower draft limits force ships to carry less cargo, raising costs and contributing to longer queues, with about 113 vessels waiting on August 3 versus 40 in early January. Larger-lock transits have also become exceptionally expensive, averaging $2.5 million in recent weeks, with single-auction prices since July 28 reaching $3.78 million for some Neopanamax locks and $2.63 million for some Panamax locks. The authority said payments above $1 million reflect temporary market volatility and vessel-specific needs rather than an official fee standard, and said the announced draft changes will not cut daily transit numbers, though it did not rule out further restrictions if conditions worsen. Argus expects Gatun Lake water levels to keep falling in the coming months, and Ross Griffith warned conditions could become worse than in 2023. The broader backdrop is worsening energy market uncertainty: the U.S. Energy Information Administration (U.S. energy statistics agency) pushed expected Middle East production and trade normalization back to early 2027, forecast a 600,000-barrel-per-day supply shortfall through the end of 2027, and raised its average third-quarter Brent forecast to $85 a barrel from $74. Brent settled at $88.91, up 1.36%, while WTI settled at $83.20, up 1.3%, with WTI up 45% so far this year.