Global Oil Flows Disrupted as Japan Backs Major U.S. LNG Investment

Global oil shipping faced renewed disruptions over the weekend as tanker traffic through a critical chokepoint slumped to its lowest level in months. According to OilPrice.com, only 11 tankers transited the Bab el-Mandeb Strait between the Red Sea and the Arabian Sea on Sunday, July 26. Data from Kpler cited by Reuters shows this is the lowest count in months, driven by Houthi attacks on Saudi oil infrastructure and threats against vessels.

The Iran-aligned Houthis in Yemen announced a blockade on Saudi shipments last week, subsequently targeting two Saudi oil tankers. This has caused some ship operators to reroute vessels north toward the Suez Canal or turn around before entering the Red Sea. Of the 11 ships that passed through on Sunday, seven were oil tankers. The maritime intelligence firm Windward noted that Saudi Arabia's Yanbu port has seen vessels switch off their transponders to operate "AIS-dark" to shield against the Houthi threat.

Separately, fuel prices in Australia hit their highest level since March last week, according to a Weekly Petrol Prices Report published Monday, July 27. Australia’s nationwide gasoline price reached US$1.27 (AUS$1.82) per liter for the week ending July 26. Diesel prices also jumped. OilPrice.com reported that hostilities in the Middle East drove international crude oil prices to a two-month high, pressuring Australia's economy despite the country being a major LNG producer. Australia relies on imports for most of its transportation fuel, a situation worsened by a March refinery fire.

In a significant development for U.S. energy infrastructure, the Japanese government may approach foreign banks to help finance pledged investments in U.S. natural gas production. According to OilPrice.com, this is part of a trade deal agreed last year between the U.S. and the Trump administration. Japan pledged a total of $550 billion in investments for the U.S. economy, with $33 billion earmarked for natural gas.

The investment package will fund the construction of the world's largest natural gas power plant, with a capacity of 9.2 GW, and a deepwater oil port in the Gulf of Mexico. The Japanese finance ministry stated that loans from foreign banks could be guaranteed by Japan’s export credit agency, NEXI. Reuters reported earlier this month that JP Morgan and other U.S. lenders were close to sealing a deal to participate. U.S. Commerce Secretary Howard Lutnick said the Gulf port project, with a daily capacity of 1 million barrels, is expected to generate $20–30 billion annually in U.S. crude exports.

Implications for the Bakken: While these events are unfolding thousands of miles away, they underscore the fragile nature of global oil logistics and the importance of stable export corridors for U.S. producers. The planned Japanese-backed infrastructure investments, particularly the Gulf Coast oil port, could enhance takeaway capacity for domestic crude, including volumes from the Bakken. However, continued volatility in key shipping lanes like the Red Sea highlights the geopolitical risks that can swiftly impact global oil prices and market access.