8NOV

Gulf producers build around the strait

3 min read

19:56UTC

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 Sea⁠¹. 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 million⁠². 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 declaration⁠³. 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

Hormuz crossings fell 78% on GL X's first day

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

Occurred 22 Jun 2026

Read story →

Different Perspectives

Office for Budget Responsibility

The OBR's 28 October forecast assumed $82 oil for 2026 and 2027, from market prices for the ten working days to 19 August, and blamed dearer wholesale energy on the war without naming Iran. It expects CPI inflation close to 4% in early 2027 even at that price.

Hengaw, Kurdish rights group

Hengaw reported the 3 November hangings of Amirhossein Maleki and Amirhossein Ebrahimi in Isfahan, saying Ebrahimi was tortured into confessing and that nine of 12 people sentenced to death in the case have now been hanged. Iran's judiciary holds that the defendants killed members of the security forces.

FINTRAC, Canada's financial intelligence unit

FINTRAC worked with the US Treasury on the 6 November designation of eight money services businesses in British Columbia, Ontario and Quebec. Treasury says the businesses still operate, some under new names, so closing them falls to Ottawa.

Abdul Qadir al-Dakhil, Governor of Nineveh

Al-Dakhil cancelled three Mosul International Airport contracts on 7 November over alleged links to armed groups, after meeting Prime Minister Ali al-Zaidi in Baghdad. He named no group or company, and said the contracts will go to international companies.

Kuwait

Kuwait condemned the Houthi missile fired towards the Madinah region on 5 November and restated its support for Saudi Arabia, the Qatar News Agency reported. Its state tanker company, Kuwait Oil Tankers Company, is among the Gulf state fleets on Iran's expanded Hormuz list.

Scott Bessent, US Treasury Secretary

Treasury designated an alleged Chandigarh false-flag network on 4 November and eight Canadian exchangers on 6 November, while State sanctioned alleged MANPADS intermediaries. None of the actions touches an oil buyer; they target the paper, cash and procurement around Iran's trade.

Written with AI from Lowdown's published reporting. Not individually reviewed by an editor. Editorial standards.