Slump in flows reflects dramatically lower European fuel consumption as pandemic decimates demand.
Egypt’s Sumed pipeline was designed to pump 2.5 million barrels of Persian Gulf crude from the Red Sea to the Mediterranean every day. Since May, a slump in oil demand and OPEC+ oil production cuts seem to have combined to slash flows to about a quarter of that.
Acting as an artery in the global oil trade, the Sumed gets Middle Eastern oil to the north African coast, allowing giant supertankers – that would otherwise sit too deep in the water – to continue to use the Suez Canal. From the Mediterranean port of Sidi Kerir, it can then be shipped to refineries across Europe and North America. The slump in flows reflects European fuel consumption that plunged by as much as 90% in some instances and, in response to that, the deepest output reductions in history by the Organization of Petroleum Exporting Countries and allied producers.
In April, Saudi Arabia embarked on a production surge, pushing output to an all-time high and helping to drive down prices. That’s visible in the flows through the canal.
Then output cuts agreed by OPEC and its allies came into effect in May. Saudi Arabia’s production tumbled and Sumed flows almost certainly followed suit. The amount of crude poured into the Sumed fell to just below 700,000 barrels a day in June and July, down from about 1.3 million in April, according to tanker tracking data compiled by Bloomberg. Meanwhile, the amount leaving Sidi Kerir – the Mediterranean end of the line – increased. That would imply stockpiles there probably swelled.
There is almost 20 million barrels of oil-storage capacity at either end of the Sumed, meaning the movements of tankers at either end of the conduit won’t necessarily correlate perfectly with flows through it. The industry’s biggest tankers sit too deep in the water to navigate the Suez Canal fully loaded. They can either discharge all their cargo at Ain Sukhna and then return to the Persian Gulf for their next consignment, or they can unload part of it at Ain Sukhna and then sail through the waterway before refilling at Sidi Kerir.