US-Israeli War on Iran Causes Major Oil, Gas Disruptions

The U.S. and Israeli war against Iran has caused oil and gas exports to be disrupted from the Middle East. Production was stopped from Qatar all the way up to Iraq. Kuwait announced cuts this weekend.

Analysts predict the United Arab Emirates (UAE) and Saudi Arabia, too, will have to reduce their output as soon as possible when they run out of oil storage.

Here are the major energy disruptions that have occurred so far:

Production Shutdowns

Kuwait Force Majeure: Kuwait Petroleum Corporation cut oil output and declared force majeure March 7, due to the war that shut down exports through the Strait of Hormuz.

Abu Dhabi National Oil Company said it actively managed offshore production levels in order to maintain "operational flexibility" on 7 March. A fire was also caused by debris in the UAE's Fujairah Port, which is a major global hub for oil storage and bunkering.

Iraq warns about further cuts. OPEC's 2nd largest producer, Iraq has cut almost 1.5 million barrels a day (bpd), due to a lack of export and storage capacity. Officials told on 3 March that if exports do not resume, the figure could reach 3 million bpd in merely days. According to a survey conducted in January, total Iraqi production was 4.1 million barrels per day (bpd), which is equal to about 4% world output.

As a precaution, several companies in Iraqi Kurdistan have also stopped production at their fields. In February, the region exported 200,000 barrels per day (bpd) via pipeline to Turkey.

QatarEnergy LNG stopped: Qatar halted operations at its LNG plants on March 2. This affected some of the largest plants in the world and a source which supplies around 20% of global LNG. QatarEnergy suspended downstream production a day later. On March 4, it declared force majeure for LNG shipments.

Saudi disruptions. Saudi Arabia has suspended production at its 550,000 bpd 'Ras Tanura' refinery. It also began rerouting crude loads from eastern ports to Yanbu, on the Red Sea. Saudi Defence Ministry said that the refinery was hit again on March 4 without any damage.

Israel has also reduced its oil and natural gas production. Iran's Revolutionary Guards claimed on March 7, that they had attacked an Israeli refinery following the attack on Iran's Tehran refinery, according to state media. There were reports of no damage, but air raid sirens were heard in the Haifa region.

Shipping

Strait of Hormuz - traffic was mostly closed through the Strait after Iran attacked five ships. Only a small number of tankers were able to transit, cutting off a vital artery that accounts for about 20% of global LNG and oil supply.

Iran declares Strait closed. A senior Iranian Revolutionary Guards officer said on March 2, that the Strait of Hormuz is closed. He warned that Iran will fire on any ships that attempt to pass.

Iranian state media reported that the Guards claimed on March 7th they had struck a Marshall Islands flagged tanker in Strait of Hormuz in their latest attack.

Since March 1, the United Kingdom Maritime Trade Operation (UKMTO), has reported a number of?attacks on ships in the area, including a tanker near Kuwait and a ship carrying containers in the Strait of Hormuz.

War-risk insurance cancelled Major marine insurers cancel war-risk coverage on vessels operating in the Gulf of Iran and adjacent waters.

US provides assurances. Trump stated that the U.S. Navy can escort oil tankers through Gulf Shipping Strait. He also directed the U.S. International Development Finance Corporation (IDFC) to provide financial and political risk insurance for Gulf Shipping. However, shipowners and analysts are skeptical this will be sufficient.

Impact on Consumers

China reduces refinery runs. Chinese refiners have cut back on crude unit production or are accelerating planned maintenance due to disruptions in crude flow.

India looks for alternatives: India has been looking at alternative sources of crude oil, LPG, and LNG in order to be prepared if the crisis lasts longer than 10-15 days.

Indonesia shifts its sourcing: Indonesia intends to increase U.S. crude oil imports to offset the reduced Middle East supply.

Traders said that alternative supplies are available. Cargoes can be shipped from Brazil, West Africa, and the U.S. but it takes over a whole month to get them to Asia. They are also more expensive due to soaring freight costs. (Reporting from Ahmad Ghaddar, London; Nerijus Adomatis, Oslo; Editing done by Matthew Lewis Gareth Jones Helen Popper

(source: Reuters)