With the recent surge in Brent crude due to increased tension with Iran the announcement that oil is flowing through a pipeline to circumvent the Straits of Hormuz is somewhat comforting. While oil is trying to get a feeling for the depth of the slowdown in China there is no doubt that increased geo-political risk over Iran has added to that bullish rebound in price.

Bloomberg News reports that Abu Dhabi started exporting its first crude from a pipeline that bypasses the Strait of Hormuz, shipping the fuel to a refinery in Pakistan. The pipeline, stretching from Abu Dhabi to the neighboring sheikhdom of Fujairah on the Gulf of Oman, was loading the first shipment of 500,000 barrels to the Pakistani plant, Mohamed Bin Dhaen Al-Hamli, oil minister for the United Arab Emirates, said yesterday at a ceremony to inaugurate the network. International Petroleum Investment Co. spent $4.2 billion building the 423- kilometer (263-mile) link, Khadem Al-Qubaisi, managing director of the Abu Dhabi-run fund known as IPIC, said at the ceremony in Fujairah. Bloomberg says that Abu Dhabi, the U.A.E.'s capital and holder of more than 90 percent of its oil, built the link as an export route for crude that avoids Hormuz at the mouth of the Persian Gulf. Iran has threatened to block the strait, a chokepoint for tankers carrying a fifth of the world's traded oil, in retaliation for sanctions targeting the country's nuclear program. The U.A.E., the fifth-biggest oil producer in OPEC, pumped 2.61 million barrels a day in June, according to data compiled by Bloomberg. Fujairah is one of the U.A.E.'s seven sheikhdoms.

An Iranian lawmaker, Mohammad-Hassan Asferi, said yesterday the pipeline's limited capacity would keep it from obviating the need of regional suppliers to export most of their oil through the strait. He dismissed the project as propaganda and political maneuvering guided by the Western countries, especially the United States, which aims to reduce the strategic importance of the Strait of Hormuz, according to state-run Press TV. Asferi serves on the national security and foreign policy committee of Iran's parliament.

The Financial Times take is that Saudi Arabia and the United Arab Emirates have opened new pipelines bypassing the Strait of Hormuz, the shipping lane that Iran has repeatedly threatened to close, in a move that will reduce Tehran's power over oil markets. The quiet opening of the pipelines comes amid heightened diplomatic tensions over Tehran's nuclear program. Iran's oil production has fallen to its lowest in more than 20 years due to the impact of US and European sanctions, prompting Tehran to repeat its threats to shut down the strait, the conduit for a third of the world's seaborne oil trade. The FT says that the new links will more than double the total pipeline capacity bypassing the strait to 6.5m barrels a day, or about 40 per cent of the 17m b/d that transits Hormuz.

In China the Wall Street Journal is suggesting that an increase in wages may suggest that the slowdown may be not as bad as expected. The Journal says that wages are still climbing rapidly in China and many companies are having trouble filling jobs despite the sharp economic slowdown here-evidence of a structural shortage in the labor market that may help China adjust to slower growth without political instability and whet consumer appetites for foreign goods.

Oil is still choppy with an upward bias. Brent crude is leading as the threats are obviously more of a problem with Europe.

Trilby Lundberg the Princess of Petro says that gas 6.77 cents in the past three weeks to $3.4103 a gallon. Trilby told Bloomberg Prices at the pump fell as West Texas Intermediate crude for August delivery on the New York Mercantile Exchange jumped $7.34, or 9.2 percent, in three weeks to $87.10 a barrel on July 13. Futures have declined 21 percent since reaching a year-to- date settlement high of $109.77 on Feb. 24. Gasoline futures on the Nymex surged 24.62 cents, or 9.6 percent, in the three weeks ended July 13 to $2.8161. Gasoline has lost 18 percent since reaching a year-to-date high of $3.4166 on March 26.

Crude oil and gasoline have risen on speculation that a struggling U.S. jobs market, Europe's debt crisis and a slowdown in China will prompt more fiscal easing to stimulate growth.

 The Two Big Events for Oil this week should be the EIA report and a speech by Big Ben Bernanke. We should see a build in crude supply after the big surprise last week. Look For Crude to be up 3.5 million barrels. And gas up 1 and distillates up 1 Runs down 0.5.

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Phil Flynn