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Suez Canal Closure Concerns Go Viral

Submitted by Tyler Durden on 01/28/2011 13:38 -0400

Shockingly, the "pundits" have suddenly realized that courtesy of the upheaval in Suez, the canal with the same name may be closed, which would wreak havoc on shipping costs. Once again, Zero Hedge was just ahead of the curve: "Egyptian Stock Market Plunges Over 11% To Fresh Multi-Year Lows; Is A Suez Canal Transit Halt Imminent?" The just announced countrywide curfew will not make Suez Canal operability any easier. For those who are concerned about what a Suez closure means, we recreate what we wrote previously on the topic. And just in from Reuters, Energy Secretary Steven Chu has declined to say if he is worried Egypt protests may disrupt Mid-East oil, but believes that serious disruptions will have oil prices. By harm he means make them surge higher.

From Egyptian Stock Market Plunges Over 11% To Fresh Multi-Year Lows; Is A Suez Canal Transit Halt Imminent?

And while the important part of the world may ignore what is
happening in Egypt, after all it is not US banker money thay is being
lost, they may want to consider this: according to reports, there has
been live fire in Suez, where the police headquarters have been taken over.
More importantly, according to the Guardian, we may see the first army
insubordination in this city: "a lawyer and executive director for the
Arabic Network for Human Rights
Information, has tweeted that some army units in Suez are refusing to
support the crackdown against the people." Which means the government
may be about to lose control over Suez... And the Suez Canal.

What is special about the Suez Canal? It just happens to be one of the seven most important oil chokepoints:

Suez Canal

Closure of the Suez Canal and SUMED Pipeline would add 6,000 miles of transit around the continent of Africa.
The
Suez Canal is located in Egypt, and connects the Red Sea and Gulf of
Suez with the Mediterranean Sea, covering 120 miles. Petroleum (both
crude oil and refined products) accounted for 16 percent of Suez cargos,
measured by cargo tonnage, in 2009. An estimated 1.0 million
bbl/d of crude oil and refined petroleum products flowed northbound
through the Suez Canal to the Mediterranean Sea in 2009, while 0.8
million bbl/d travelled southbound into the Red Sea. This represents a decline from 2008, when 1.6 million bbl/d of oil transited northbound to Europe and other developed economies.

Source: U.S. Government Click here to zoom

Almost
35,000 ships transited the Suez Canal in 2009, of which about 10
percent were petroleum tankers. With only 1,000 feet at its narrowest
point, the Canal is unable to handle the VLCC (Very Large Crude
Carriers) and ULCC (Ultra Large Crude Carriers) class crude oil tankers.
The Suez Canal Authority is continuing enhancement and enlargement
projects on the canal, and extended the depth to 66 ft in 2010 to allow
over 60 percent of all tankers to use the Canal.

According to the Energy Library, closing the Suez canal would add 6,000 miles of transit time across the Cape of Good Hope:

The
Suez Canal, Egypt is one of the world's most important waterways and
its Sumed Pipeline is considered a significant geographic oil transit
chokepoints from the Red Sea to the Mediterranean Sea. The Suez Canal is
west of the Sinai Peninsula and serves as a two-way water transport
route between Europe and Asia. It is 190 km long and 300 meters wide.
The canal supports approximately 8% of the world’s shipping traffic with
almost fifty vessels traveling through the canal daily.

In 1967,
the canal was closed due to the outbreak of the Six-Day War. At the
time, Israel has taken over the Sinai Peninsula which resulted in the
Suez Canal becoming a buffer zone between the forces of fighting. The
Suez Canal was reclaimed by the Egyptians in the 1973 Arab-Israeli War
and was reopened in 1975. Since its reopening, the canal has been
widened twice.

The Suez Canal is considered a geographic
“chokepoint” due to its influence in the world oil trade and because its
narrow-width could be easily blocked, causing disruption to oil
transport. Oil shipments from the Persian Gulf travel through the Canal
primarily to European ports, but also to the United States. In 2006, an
estimated 3.9 million bbl/d of oil flowed northbound through the Suez
Canal to the Mediterranean, while 0.6 million bbl/d traveled southbound
into the Red Sea.

Over 3,000 oil tankers pass through the Suez
Canal annually, and represent around 25 percent of the Canal’s total
revenues. With only 1,000 feet at its narrowest point, the Canal is
unable to handle large tankers. The Suez Canal Authority (SCA) has
discussed widening and deepening the Canal to accommodate VLCCs and
Ultra Large Crude Carriers (ULCC).

The 200-mile long Sumed
Pipeline, or Suez-Mediterranean Pipeline, also provides a route between
the Red and Mediterranean Seas by crossing the northern region of Egypt
from the Ain Sukhna to the Sidi Kerir Terminal. The pipeline provides an
alternative to the Suez Canal, and can transport 3.1 million bbl/d of
crude oil. In 2006, nearly all of Saudi Arabia’s northbound shipments
(approximately 2.3 million bbl/d of crude) were transported through the
Sumed pipeline. The pipeline is owned by Arab Petroleum Pipeline Co., a
joint venture between EGPC, Saudi Aramco, Abu Dhabi’s ADNOC, and Kuwaiti
companies.

Closure of the Suez Canal and the Sumed
Pipeline would divert tankers around the southern tip of Africa, the
Cape of Good Hope, adding 6,000 miles to transit time.

Then
again, in Bernanke central planning world, this development will likely
mean that oil prices are about to plunge to all time lows.

- advertisements -

Fri, 01/28/2011 - 13:38 | 913601 Mr Lennon Hendrix

Ruh roh!

Fri, 01/28/2011 - 13:52 | 913652 furieus

Should it become necessary: Maybe Israel can invade, you know, to... uhm... provide stability to the global economy.

"Stability" seems to be a big theme for TPTB lately, particularly when justifying, you know, extraordinary measures ;)

Fri, 01/28/2011 - 14:15 | 913753 Mr Lennon Hendrix

Maybe Israel can invade, you know, to... uhm... provide stability to the global economy.

Stop giving Rahm ideas. ;)

Fri, 01/28/2011 - 14:17 | 913762 Mad Max

Noooo! Now we have to make him "duh Mayor" of Chicago or else he'll do something even worse!

Fri, 01/28/2011 - 14:30 | 913816 CrockettAlmanac.com

Noooo!

Rahm = Mr. Sluggo?

Fri, 01/28/2011 - 16:54 | 914364 BigJim

Even if the Egyptians manage a coup, I can't see their new leaders wanting to shut the canal.

I can, however, see the West orchestrating a false flag event that shuts down the canal as an excuse for a quick invasion for a spot of regime restoration.

Fri, 01/28/2011 - 16:22 | 914203 CPL

I love how politics always seems to enter a discussion of engineering a solution.

Doesn't matter who runs the canal. They have to dig, dredge and maintain it.

Fri, 01/28/2011 - 15:45 | 914041 bankonzhongguo

The level of media black out on Egypt in the US has been quite amazing - a corollary to the Egyptian internet blackout. Thanks Vodaphone also. I am back to shortwave radio and blogs to figure out what is going on. On 100 cable channels last night - there was no information being discussed about Egypt in the US whatsoever. Kardashian poon - yes (thanks CNN). Egyptian revolution - not so important. Even if the military stops everything cold. Hizballah and AQ are in transit to a new battlefield - Cairo. Time to watch The Battle of Algiers again.

In all of this only the Muslim Brotherhood is mentioned. ElBaridea is under house arrest. Where is the (new) Wafd party? Where is El-Sayyed El Badawi? Who is that? CNN won't tell you. They are only the largest secular political faction. I guess their perception that Israel broke the Camp David accords is a red flag for Arab rationalism.

While things like happen all the time and it could blow over. The real hubris coming out of the Jerusalem Post and Haaretz that every is fine is shocking. This may be the biggest thing to hit Israel since its foundation. There may be more kibbutz/settlements built in Kansas and Nebraska than the West Bank this year. Unfortunately, between the "the fence" (its not a wall) and claiming Jerusalem is the new Israeli capital, there must be a realization that 80 million energized Egyptian Arabs are living next door to less than 6 miilion Jews.

Where is Wafd?

Where EXACTLY is Mubarak?

Is he in Egypt or London?

Has he left the building already?

Fri, 01/28/2011 - 13:39 | 913605 Ben Probanke

close to zero chance.

Fri, 01/28/2011 - 13:49 | 913650 HarryWanger

Agreed. There is no way in hell the Suez will be closed.

Fri, 01/28/2011 - 13:54 | 913674 tellsometruth

Well if it did we would send troops into the region... oh uuhhhh... oh no understand WH reaction thus far....

Fri, 01/28/2011 - 14:24 | 913796 Eager learner

You have troups in the region. 50,000 In Saudi Arabia if I'm not mistaken.

Fri, 01/28/2011 - 15:16 | 913963 New_Meat

O .ne. Ike. Shutting down the canal has some precedent '73 and '56.

This is pretty well done. http://en.wikipedia.org/wiki/Suez_Crisis

- Ned

Fri, 01/28/2011 - 13:55 | 913678 Arius

i dont think so either.

i wondered what the impact of internet shutting down in the ME will be on analysts evaluation of GOOG, EBAY, AMZN etc.... internet related stocks...any thoughts?

Fri, 01/28/2011 - 14:02 | 913702 tmosley

HarareWanger says the canal will never close, and that the Zimbabwe dollar is worth three American dollars.

Fri, 01/28/2011 - 14:17 | 913765 faustian bargain

Also, the Egyptian government is stable and there is nothing to worry about.

The phrase "famous last words" comes to mind.

Fri, 01/28/2011 - 15:26 | 914008 Citxmech

It's pretty apparent both Hilary and Barack are making statements to set up our new relationship with the new government... If you read between the lines, they already know the jig is up.

Fri, 01/28/2011 - 14:25 | 913798 countryboy42

Harry,

Did you eat a lot of paint chips as a kid? Do you have any idea how easy it would be to close the Suez for a VERY LONG time? Not gonna say how, but I'm sure there are a bunch of people out there who have the same thought.

Fri, 01/28/2011 - 15:08 | 913938 mick_richfield

Did you eat a lot of paint chips as a kid?

You say that like it's a bad thing.

He had enough heavy metals in his childhood diet, and thus is not fixated on acquiring them in adulthood, as are so many of the less fortunate ZHers.

Fri, 01/28/2011 - 14:31 | 913817 OMG

Nah they would never want to protect their oil interest!

Fri, 01/28/2011 - 14:33 | 913827 CrockettAlmanac.com

Agreed. There is no way in hell the Suez will be closed.

After the 1967 Arab-Israeli war, also called the Six Day War, the canal was closed by an Egyptian blockade until 5 June 1975

http://en.wikipedia.org/wiki/Suez_Canal

Fri, 01/28/2011 - 14:42 | 913863 Bill Lumbergh

Let's not nitpick now...

LOL

Sat, 01/29/2011 - 01:24 | 915546 Arkadaba

More and more Harry reminds of a boy I battled with when I was young http://www.youtube.com/watch?v=jHPsagwgBaM young - he got his dad to fight his battles.

Fri, 01/28/2011 - 14:42 | 913864 TreadwCare

by Ben Probanke
on Fri, 01/28/2011 - 12:39
#913605

close to zero chance.

That's kind of not the point . . .

Global commodities market traders would never let a little thing like facts get in the way of some speculative frenzy.

Just the contagion rumour is enough.

Fri, 01/28/2011 - 14:51 | 913889 Ben Probanke

so sell the frenzy no? will have a greater negative on oil demand than on oil supply. its not an arab affair its about emerging markets imploding on inflation. china next? last big protest in egypt were in april 2008.

Fri, 01/28/2011 - 13:41 | 913613 JW n FL

Internet Switch!

FAIL!!! BITCHEZ!!!!!

The people are in control, the army is shaking hands with the people!

Fri, 01/28/2011 - 14:37 | 913840 CrockettAlmanac.com

Shake hands with your Uncle Max, my boy
And here is your sister Shirl
And here is your cousin Isabel
That's Irving's oldest girl
And you remember the Tishman twins
Gerald and Jerome
We all came out to greet you
And to wish you welcome home

Fri, 01/28/2011 - 14:40 | 913850 JW n FL

Howdy All!!

Fri, 01/28/2011 - 13:42 | 913615 cossack55

Hey, we amerikans built the damn thing, why ca.........oops, wrong canal.

Fri, 01/28/2011 - 13:42 | 913616 Henry Chinaski

Better top off the truck on the way home tonight.

Fri, 01/28/2011 - 15:31 | 914022 Citxmech

Bingo!

Time to top off any unfilled fuel cans you might have while you're at it.

Fri, 01/28/2011 - 13:42 | 913619 william the bastard

Oil up twice as much as gold

Fri, 01/28/2011 - 16:04 | 914130 Taint Boil

One cubic mile of oil:

Does a cubic mile seem “huge” when considering the world’s total oil consumption?

17,700,000 barrels [US, petroleum] per day = 0.00067513252496 cubic miles per day

1 divided by 0.00067513252496 cubic miles =

1481.1906744668354216509912877713 days of oil use to fill 1 cubic mile then divided by 365.25 =

4.0552790539817533789212629370877 years to fill one cubic mile.

So… if you had one cubic mile of oil you could supply the world with oil for about four years. Of course oil doesn’t exist in cubic mile “chunks” in the ground – just a tool to help you visualize.

Fri, 01/28/2011 - 13:42 | 913622 yabyum

Glad I bought some USO yesterday. The whole region is a powderkeg and the fuse has been lit.

Fri, 01/28/2011 - 14:39 | 913847 CrockettAlmanac.com

Glad I bought some USO yesterday.

Go long Bob Hope?

Fri, 01/28/2011 - 13:42 | 913624 JW n FL

http://english.aljazeera.net/watch_now/

Fri, 01/28/2011 - 13:43 | 913628 papaswamp

Strategically it would be a nightmare for the US. 3 carrier groups in that area. cutting them off would place the US in a rather precarious position.

Fri, 01/28/2011 - 13:57 | 913685 Founders Keeper

[Strategically it would be a nightmare for the US. 3 carrier groups in that area. cutting them off would place the US in a rather precarious position.]---papaswamp

Time to activate the US Office of High Frequency Trade Puppet Makers.

Seriously, though, thanks for the info. Am always interested in the locale of our flat tops.

Fri, 01/28/2011 - 14:40 | 913851 CrockettAlmanac.com

Am always interested in the locale of our flat tops.

They're groovin' up slowly.

Fri, 01/28/2011 - 14:06 | 913718 hedgeless_horseman

Cutting them off? From what? They are in the Persian Gulf.

Fri, 01/28/2011 - 14:15 | 913754 JW n FL

by papaswamp
on Fri, 01/28/2011 - 12:43
#913628

Strategically it would be a nightmare for the US. 3 carrier groups in that area. cutting them off would place the US in a rather precarious position.

*****************************************************************************

I promise you, no one.. wants to piss off a (1) Carrier Group.. let alone 3 that can fight together.

http://en.wikipedia.org/wiki/Carrier_battle_group

http://en.wikipedia.org/wiki/Carrier_Strike_Group

http://science.howstuffworks.com/carrier-group2.htm

those carriers are safer than you and i in our own homes. fact.

Fri, 01/28/2011 - 14:36 | 913838 doggings

lol, what nonsense. when was the last time an undetected Chinese sub surfaced in the middle of an exercise session in your front room?

gotta love America's false sense of invincibility

Fri, 01/28/2011 - 14:41 | 913854 JW n FL

does chinese food delivery count? with the front door open? cause ummmmm more often than you'd think at my house... lol, sorry.

Fri, 01/28/2011 - 14:43 | 913866 Rodent Freikorps

Declare hostilities and test that theory.
I dare ya.

Fri, 01/28/2011 - 15:55 | 914093 JW n FL

I am sure all kinds of people slip thru all the time... I am sure that mis-information is just as valuable, if not more than what they think they know... thusly can do, to us... there are 2 subs in a carrier group, or so that is the public number. lol

Fri, 01/28/2011 - 16:02 | 914118 Rodent Freikorps

Would you want to go to PD and run your diesels to charge your batteries in the same ocean as the USN? I would not.

Fri, 01/28/2011 - 15:34 | 914029 Citxmech

One word: "Sunburn" Bitchez.

[OK two words...]

Fri, 01/28/2011 - 15:21 | 913987 New_Meat

papa-adds like 20 days to transit to-from Norfolk, maybe faster if they bend on. If hostilities, would not consider transit Suez (think even an old Silkworm at the bottleneck).

All considered in the CONPLAN.

- Ned

Fri, 01/28/2011 - 13:45 | 913634 Xibalba

ALLAH AKBAR!!!!

Fri, 01/28/2011 - 13:46 | 913637 Jason T

A virtuous cycle right Ben?

Fri, 01/28/2011 - 13:46 | 913638 HitTheFan

20dayMA holding, it'll all blow over (again). Onwards to 1400.

Fri, 01/28/2011 - 14:46 | 913876 HarryWanger

That's why we may see a strong rally into the close. Everyone knows there is a great chance this will be resolved over the weekend. If that happens, the market will be up 2-3% on Monday. Much more risk being short vs. long over this weekend.

Fri, 01/28/2011 - 15:12 | 913954 SilverIsKing

"Much more risk being short vs. long over this weekend."

May I ask what you base your assertion on?

Fri, 01/28/2011 - 15:19 | 913974 faustian bargain

He's trying to 'win the future'.

Fri, 01/28/2011 - 15:22 | 913991 New_Meat

too much WTF this week ;-)

Fri, 01/28/2011 - 16:06 | 914141 Rodent Freikorps

If you are gonna "win" something, doesn't that mean someone has to lose?

Why does his "win" sound more like the lottery than working hard towards a common goal?

Fri, 01/28/2011 - 13:49 | 913649 MiddleMeThis

Dammit! Where's Moses when you need him?

Fri, 01/28/2011 - 13:50 | 913651 SpeakerFTD

Quick question concerning ags. If the Suez is closed, then ag exports out of the U.S. would be more difficult? Spread explodes between U.S and delivery markets? Just wondering if a Suez closing would prove to be bearish U.S. ags.

(We have been arguing about this, and we wanted another opinion)

Fri, 01/28/2011 - 13:56 | 913680 Mad Max

I don't think so. Most US ag exports heading east of Egypt are heading all the way to China/east Asia and would cross the Pacific starting from a Pacific port. Probably more bearish for European ags than US.

Fri, 01/28/2011 - 13:57 | 913686 SpeakerFTD

Good to know. Thanks for the info.

Fri, 01/28/2011 - 13:58 | 913688 papaswamp

I would think prices would go higher...perhaps the BDI also as ships would have much farther to travel. ...but I seriously doubt it would close.

Fri, 01/28/2011 - 13:50 | 913653 tellsometruth

we gonna get a dow pump to green for the weekend? -131

Fri, 01/28/2011 - 14:48 | 913882 HarryWanger

Not to green but IMO a strong possibility that we rather hard into the close. Much more risk being short vs. long over the weekend when considering this could blow over during the weekend.

Fri, 01/28/2011 - 13:50 | 913655 bania

how many facebook accounts do we export through the Suez Canal daily?

Fri, 01/28/2011 - 14:14 | 913748 digitlman

Thanks for the laugh!

Fri, 01/28/2011 - 14:42 | 913865 Vergeltung

excellent lol

Fri, 01/28/2011 - 13:51 | 913656 Johnk

AJ: unconfirmed reports of army vs. police clashes in Cairo...

http://english.aljazeera.net/watch_now/

Fri, 01/28/2011 - 14:02 | 913701 Founders Keeper

Machine gun fire in Cairo reported 15min ago by cnbc. FWIW.

Fri, 01/28/2011 - 13:56 | 913675 Let them all fail

Tyler, we read your posts and are well aware that you are ahead of the curve, no need to sound cocky about being right - That said, thanks for sharing the al jazeera live feed, good stuff.

Fri, 01/28/2011 - 13:55 | 913676 THE DORK OF CORK

Hillary - "Ben what went wrong ?" , Ben - " the oil presssure I forgot to check the oil pressure"

www.youtube.com/watch?v=aZdp46Jen_w

Fri, 01/28/2011 - 14:45 | 913873 CrockettAlmanac.com

Dork, you made the first mention of the Suez canal that I saw on ZH. If the Tylers are ahead of the curve you must be ahead of the circumference.

Fri, 01/28/2011 - 16:01 | 914117 THE DORK OF CORK

Every time I think of Egypt I think of the Suez crisis 1956 - its pretty obvious what shakes the foregin counsels down there and the capitals up here.

Fri, 01/28/2011 - 20:47 | 915060 A Nanny Moose

+3.14159265

Fri, 01/28/2011 - 14:03 | 913679 dryam

It's much, much harder to manipulate the markets when there's real shit going on in the world.

Fri, 01/28/2011 - 14:00 | 913691 chet

Can't have the petty needs of millions of oppressed people fucking with commerce now can we?

Fri, 01/28/2011 - 14:04 | 913706 campag

it would be rude of Brent not to test $100- tonight.

a good wake up call to Ben to print more oil.....

is that right????

Fri, 01/28/2011 - 14:21 | 913781 hazenyc

http://english.aljazeera.net/news/middleeast/2011/01/2011128125157509196.html

Spreading to Jordan.. yikes!

Fri, 01/28/2011 - 14:22 | 913789 Ben Probanke

NEW YORK, Jan 28 (Reuters) - The Suez Canal has been

operating normally over the past three days amid growing unrest

in Egypt, and the transit schedule for Saturday shows no

delays, a shipping source said on Friday.

"Tomorrow's convey is set to go ahead, they're lining up

now with no delay," said the Egypt-based source who tracks

vessels moving through the main passage for Europe-bound Middle

East crude. Tanker brokers also reported no signs of

disruption.

Fri, 01/28/2011 - 14:23 | 913792 Common_Cents22

US Energy Secretary Steven Chu

In a sign of one major internal difference, Mr. Chu has called for gradually ramping up gasoline taxes over 15 years to coax consumers into buying more-efficient cars and living in neighborhoods closer to work.

"Somehow we have to figure out how to boost the price of gasoline to the levels in Europe," Mr. Chu

Yeah, just what we need $7-$9 a gallon gas. Elections do have consequences. Higher taxes, cutting supply, more burdensome regulation.

Fri, 01/28/2011 - 15:32 | 914024 New_Meat

Dr. Chu has his PhD. in Physics. Reportedly his mother was the economist.

http://en.wikipedia.org/wiki/Steven_Chu

"Under his leadership in 2010 the Department of Energy began enforcing efficiency limits on toilets and shower heads previously passed by Congress.^[39]"

Maybe better stick to physics?

- Ned

Fri, 01/28/2011 - 14:29 | 913813 Convolved Man

As the oil cartel funded

state supported

central banking ponzi pachyderm

ponderously plodded

through the low grass of human suffering

it paused,

momentarily feeling its passage

crushing the lives of so many smaller

less consequential

inhabitants of the plain,

before continuing its slow march

comfortable in its belief

"fuck it, they'll grow back."

Fri, 01/28/2011 - 14:29 | 913814 Hammurabi

Money inflows to Europe and US, this continue in the Arab world we are going to have economic boom in the western world

Fri, 01/28/2011 - 14:54 | 913895 Canuckistan Al

Oh boy, all those oil tankers diverted around the horn of Africa.

Somalian employment increases 27x. "We need to hire more pirates!"

I'm going long on Somalian pirates.

Fri, 01/28/2011 - 15:39 | 914040 Citxmech

LMFAO... No shit huh? We'd probably have to start running escorted convoys at that point.

Just add a little to the cost of doing business... [sarc.]

Sat, 01/29/2011 - 06:56 | 915710 doggings

I'm going long on Somalian pirates.

prolly time to exit and short that one then.

LMFAO... No shit huh? We'd probably have to start running escorted convoys at that point.

can I buy CDS on US carrier groups?

Fri, 01/28/2011 - 15:05 | 913929 Dr. Porkchop

No I think the US will fully support the dawn of a new day of democracy and freedom in Egypt and they will use a strategic asset for the betterment of their society.... </sarc>

Fri, 01/28/2011 - 15:07 | 913936 max2205

WTF, Don't these idiots have guns? lame. Still going with the old throwing rocks deal. one day...

Fri, 01/28/2011 - 17:53 | 914600 StychoKiller

No 2nd Amendment = NO Guns!

Fri, 01/28/2011 - 15:08 | 913937 Aknownymouse

Tyler - now strong rumors that Mubarak himself escaped

Fri, 01/28/2011 - 15:25 | 914000 element115

I hope oil hits $100+ a barrel. The sooner, the better. We have been bouncing along the bottom for almost three years, the only way up is to completely change the current system. $100 oil will get us there quicker.

Fri, 01/28/2011 - 15:49 | 914072 cocoablini