The east‑to‑west pipeline is known as the Petroline (East–West Crude Oil Pipeline). It runs from Abqaiq, near the Ras Tanura oil terminal on the Persian Gulf, to the Red Sea export terminals at Yanbu and Al Muajjiz (left image).
Before the war, this pipeline carried roughly 1 million b/d east‑to‑west. Saudi officials now say they are only a few days away from ramping throughput to capacity of about 7 million b/d (repost). Tankers are lining up in the Red Sea to lift these redirected cargos.
The right image is a real-time Marine Traffic map of Yanbu, the end of the pipeline. The 18 red dots are anchored tankers, the red arrows are moving tankers (green is containerships). A Suezmax tanker, the largest that fit through the Suez Canal to the north, is 1MM barrels. So, ~18mm of capacity is waiting.
This will not "fix" the Strait of Hormuz problem, but getting another 6MM b/d out will definitely help (the pipeline was 1mm b/d, about to be 7mm b/d).
@mercoglianos @johnkonrad
Good color from @0xCarlos_
This pipeline was built in the 1980s as a hedge against the Iran-Iraq War. It was designed for exactly this scenario — but it hasn't operated anywhere near 7M bpd in decades.
The pumping stations along 1,200 km need to work flawlessly at 7x throughput. These aren't parallel redundant systems — one pump station failure and throughput drops to zero until repaired.
Running aging infrastructure at nameplate capacity under emergency conditions is a roll of the dice.
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Ten seafarers have now been killed in 13 attacks on merchant vessels since the Iran conflict erupted on February 28 — more than the 7 U.S. servicemen killed in the war.
The focal point is shifting: can the Strait of Hormuz be reopened? Is the Administration pivoting to that mission?
Every day without a visible path to reopening, the market will price in more risk.
A 10% increase in energy prices that persists for a year would push global inflation up by 40 basis points and slow economic growth by 0.1-0.2%, International Monetary Fund Managing Director Kristalina Georgieva said.
So, what price measures "persists for a year?"
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2/5
As the table below shows, crude oil futures prices for delivery into 2027 are trading in extreme backwardation.
3/5
Below is the calendar spread between the first contract (now April) and the 6th contract (now September).
As the bottom panel shows, this spread is -25%, a record since the mid-1990s when the contract specifications were last changed.
Thoughts on market reaction to the Venezuela news.
tl:dr
The spigot in Venezuela waiting to be opened to flood the world with crude oil and lower its price has been broken for a while.
It will take several years to fix it.
2/5
Venezuela is a founding member of OPEC their official statistics show its production (blue) is down 71% from its 1998 peak.
Its sustainable capacity (max output in within 90 days and held for a year) is 1M barrels/day (orange).
Venezuela is at its maximum now.
3/5
Why the big production decline?
Socialist Hugo Chávez was elected in December 1998. He turned out to be a brutal dictator. Only to be replaced by an even more brutal dictator, Nicolás Maduro, when Chávez died in March 2013.