12JUN

Gulf producers build around the strait

3 min read

09:18UTC

Kuwait said it would raise production as Iraq's Kirkuk-Ceyhan and Saudi Arabia's Yanbu East-West pipelines moved roughly 9 million barrels a day around Hormuz, against the strait's normal 20 million.

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ConflictDeveloping

Key takeaway

Gulf pipelines route about 9 million barrels a day around Hormuz, under half the strait's normal flow.

Kuwait said it would begin increasing production, and Gulf exporters drew on pipeline routes that skirt the strait of Hormuz entirely: Iraq's Kirkuk-Ceyhan line to Turkey's Mediterranean coast and Saudi Arabia's Yanbu East-West line to the Red Sea ¹. Both run crude out to open water without touching the waterway the IRGC has formally declared closed.

The two pipelines carry roughly 9 million barrels a day between them, against the strait's normal 20 million ². Producers can route under half their oil around Iran's leverage, which is why a closure threat still bites even as the workaround keeps prices calm: the alternatives soften the chokepoint without replacing it.

Three Saudi very large crude carriers reactivated their transponders off Oman on 19 June, the first confirmed commercial crossings since the closure declaration ³. Days earlier those same ships had only been positioned near Hormuz, not transiting ; by 22 June they were moving cargo across the closure line itself, turning a structural hedge for Riyadh and Baghdad into a live one.

Deep Analysis

In plain English

While Iran claims to have closed the Strait of Hormuz, Gulf oil producers have been routing crude through two alternative pipelines that avoid it entirely. One runs from Iraq's Kirkuk oilfields north to Turkey's Mediterranean coast; the other crosses Saudi Arabia from east to west, ending at the Red Sea port of Yanbu. Together these carry roughly 9 million barrels a day. The problem is that this is less than half of what normally goes through Hormuz (about 20 million barrels a day). So the world can get some oil out of the Gulf via these pipelines, but not nearly enough to replace what would normally flow through the strait. That is one reason energy prices remain elevated even as they fall from their peak.

What could happen next?

Consequence
The 9 million barrels per day pipeline ceiling means Asian refiners dependent on Gulf crude face a persistent supply gap until the Oman corridor delivers full restoration; Kuwait's production increase partially offsets this but at reduced margin given sub-$80 Brent.
Precedent
Saudi Aramco's resumption of VLCC transits through the Oman corridor, using AIS transparency rather than dark shipping, establishes a Gulf-producer norm for Hormuz reopening: producers will transit when the route is physically safe, regardless of IRGC declaration status.

Source Landscape

This story draws on neutral-leaning sources from Qatar

Qatar

Kuwait's production increase announcement adds barrels precisely when global markets are still absorbing the Hormuz disruption overhang. Kuwait's estimated budgetary breakeven is lower than Saudi Arabia's (roughly $65-70 per barrel), giving it incentive to maximise volume even at $77.54 Brent.

The three Saudi VLCCs that reactivated AIS transponders and transited via the Gulf of Oman on 19 June (advance on represent Saudi Aramco testing the Oman corridor for its own export programme. Saudi crude transit via Oman rather than the standard Hormuz lane bypasses the PGSA insurance mandate and avoids the IRGC-claimed closure zone, but adds one to two days of transit time and Oman anchorage costs to each voyage.

For downstream Asian buyers, the key variable is whether the combined pipeline-plus-Oman-corridor supply is enough to prevent physical shortages. At approximately 9-11 million barrels per day bypass (vs 20 million normal), roughly half the pre-war Gulf export volume is physically accessible. Asian refiners running at 80-90% of their 2025 Gulf-crude intake are not immediately supply-constrained, but they are running at compressed operational margins.

Consensus view: The Oxford Institute for Energy Studies has documented the structural ceiling on Gulf pipeline bypass capacity in prior Hormuz-risk analyses: Kirkuk-Ceyhan's roughly 600,000-700,000 barrels per day (damaged and intermittent since 2023 PKK attacks on Turkish territory) and Saudi Arabia's Yanbu East-West pipeline at roughly 5 million barrels per day design capacity combine to approximately 9 million barrels per day at best, against Hormuz's normal 20 million barrels per day.

This 45% ceiling is a structural fact, not a temporary constraint.

Counter-view: The Energy Policy Research Foundation (EPRINC) in Washington notes that the bypass calculation excludes the UAE's Habshan-Fujairah pipeline (capacity roughly 1.8 million barrels per day, running from Abu Dhabi to the Fujairah coast outside the Gulf), which brings the combined bypass total closer to 10-11 million barrels per day, or 55% of normal Hormuz flow. Saudi VLCCs reactivating at Hormuz to transit the Oman lane add cargo on top of the pipeline alternative.

Key tension: Whether the combination of pipeline bypass and Oman-corridor tanker transits can supply enough volume to prevent supply-shock pressure on Asian refiners during the 60-day negotiating window, without requiring a full Hormuz commercial reopening.

First Reported In

Update #135 · Trump's threats peak, his paper stays blank

Wikipedia / Kpler· 22 Jun 2026

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Causes and effects

Caused by

Saudi tankers moved, Hormuz stayed shut

The Saudi VLCCs that were only positioned near Hormuz on 19 June reactivated their transponders and transited with cargo by 22 June, advancing from positioning to confirmed transit.

Occurred 19 Jun 2026

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This Event

Gulf producers build around the strait

The bypass covers under half of normal flow, capping the panic without removing Iran's leverage.

Led to

The paper says open, water says shut

Gulf producers routing via Oman bypass capped at under half throughput contextualises the 12-ship Hormuz collapse on 22 June.

Occurred 22 Jun 2026

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Different Perspectives

Hormuz shipping and insurance market

Kpler, Lloyd's List and S&P Global each independently put Strait of Hormuz transits at a seventh to a sixth of pre-war levels, against CENTCOM's own position that the strait remains open for transit. War-risk premiums rose from 0.25% to 3-10% of hull value in mid-July and have held steady since.

Pakistan (with China)

Iran's interior minister met Pakistan's army chief in Islamabad on 25 July, his second visit in ten days, with China separately pushing the same track; Islamabad's stated precondition, a halt to Gulf attacks, broke within hours when the Houthis struck Yanbu and Jazan. The channel inherits Baghdad's opening without yet fixing what broke it.

Saudi Arabia

Saudi Arabia absorbed Houthi strikes on Aramco-linked sites at Jazan and Yanbu on 25 July without confirming them, while holding a 30-year civil nuclear agreement Trump made conditional on joining the Abraham Accords two days after signing it. Riyadh is fighting on one front while being asked to concede on another.

Iran (state security leadership)

Iran's security chief said strikes continue until the enemy's "total surrender", and no IRNA, Tasnim or Fars report carries any stand-down language to match Washington's pause. Tehran reads the halt as "strategic decision-making fatigue", not a restraint it needs to reciprocate.

Washington (Pentagon and White House)

A Defense Department source called the bombing halt "on a hold", Pentagon spokesman Sean Parnell insisted the US "retains a deep arsenal of capabilities", and the White House credited "successful sanctions" and thirteen days of strikes for the same pause. Three explanations from one government suggest none of them is the whole one.

Oil traders

Sent Brent down 2.29 per cent to $98.38 a barrel on reports that mediation was reviving, moving the price on CENTCOM's quiet night rather than on Trump's same-day promise of a bigger operation with no deadline attached.