The Suez Canal, the SUMED pipeline, and the Bab el-Mandeb Strait continue to play crucial roles as strategic conduits for the transportation of Persian Gulf oil and natural gas to Europe and North America. These routes collectively facilitated approximately 12% of total seaborne-traded oil during the first half of 2023, with liquefied natural gas (LNG) shipments accounting for about 8% of global LNG trade.
Situated in Egypt, the Suez Canal and SUMED pipeline connect the Red Sea with the Mediterranean Sea. The SUMED pipeline, with a capacity of 2.5 million barrels per day, transports crude oil north through Egypt. Meanwhile, the Bab el-Mandeb Strait, positioned between the Horn of Africa and the Middle East, links the Red Sea to the Gulf of Aden and Arabian Sea. Notably, these chokepoints are vital for the majority of petroleum and natural gas exports from the Persian Gulf to reach Europe and North America.
Oil shipments through the Suez Canal and SUMED pipeline experienced a decline between 2018 and 2020. Factors contributing to this included renewed U.S. sanctions on Iran, resulting in reduced Iranian exports through the Suez Canal, a shift in European oil imports from the Middle East to the United States, and the impact of the COVID-19 pandemic on global oil demand.
However, in the first half of 2023, northbound crude oil flows through the Suez Canal and SUMED pipeline surged by over 60% compared to 2020. This increase was attributed to a rise in demand in Europe and the United States as they rebounded from pandemic-induced lows. Additionally, Western sanctions on Russia’s oil from early 2022 altered global trade patterns, leading to increased oil imports from the Middle East via the Suez Canal and SUMED pipeline and a decrease in imports from Russia.
Southbound shipments through the Suez Canal witnessed a significant rise between 2021 and 2023, primarily due to Western sanctions on Russia’s oil exports. In the first half of 2023, Russia’s oil exports constituted 74% of southbound oil traffic, a substantial increase from 30% in 2021. Notably, India and China were major importers of Russian crude oil. Simultaneously, the Middle East, notably Saudi Arabia and the United Arab Emirates, increased imports of refined oil products from Russia during 2022 and the first half of 2023 for power generation or storage/re-export purposes.
In the realm of LNG shipments, combined flows through the Suez Canal reached a peak of 4.5 billion cubic feet per day (Bcf/d) in 2021 and 2022 before declining to 4.1 Bcf/d in the first half of 2023. Southbound LNG flows more than doubled from 2020 to 2021, driven by increased exports from the United States and Egypt to Asia. However, in 2022 and the first half of 2023, southbound LNG volumes via the Suez Canal declined, with U.S. and Egyptian exports favoring European destinations over Asian markets.
The dynamics of northbound LNG volumes reflect changes in Qatar’s exports to Europe compared to Asia. Qatar increased LNG exports to Europe in 2022, replacing some volumes from Russia and consequently boosting northbound flows.
While trends in oil flow through the Bab el-Mandeb Strait mirror those of the Suez Canal, it is noteworthy that more oil exits the Red Sea (northbound via the Suez Canal and southbound via the Bab el-Mandeb Strait) than enters through these chokepoints. Saudi Arabia, for instance, transports some crude oil from the Persian Gulf to the Red Sea via pipeline for export, primarily to Europe. LNG flows through the Bab el-Mandeb Strait have aligned with those in the Suez Canal in recent years, largely due to reduced utilization of LNG import terminals in the Red Sea.