The Iran War’s First 90 Days Upended Energy Markets
Kansas Fed Pres Warns Oil Price Shock Might Not Be Transitory What I Cover Tsvetana Paraskova is an energy and commodities journalist who has contributed to Oilprice.com for nearly a decade, covering global energy markets, commodities,… The Iran war suddenly turned what had started as a year of oversupply in global oil and LNG markets into the worst oil and gas supply disruption in history.
Three months after the U.S.-Israeli strikes on Iran began on February 28, the world has already lost 1 billion barrels of crude oil supply, oil and gas prices have found a new, much higher floor, and whipsaw with violent volatility nearly every day, trade routes have shifted, and tanker rates have spiked.
Actual supply shortages are emerging in Asia, while global crude and fuel inventories are crashing, suggesting the oil market could soon exhaust the buffers that kept prices from soaring to $150 and beyond during the worst supply crisis the world has ever seen.
As the Strait of Hormuz was de facto closed and traffic through the chokepoint, which handles 20% of global oil and LNG supply, collapsed by about 90%, Middle Eastern oil producers were quickly forced to curtail upstream output as storage spaces filled up.
More than 10 million barrels per day (bpd) of crude were wiped off global daily production volumes, a figure no increase in supply from other parts of the world could offset.
LNG volumes from Qatar and the United Arab Emirates (UAE) were also trapped in addition to Qatar halting LNG production as early as March 2.
Qatar later in March advised that its LNG export capacity may not return to pre-war levelsfor up to five yearsdue to damage from Iranian missile strikes on the Ras Laffan complex, the world’s single largest liquefaction site.Related: Supermajor Warns Oil Prices Could Hit $160 Within Weeks The world has now lost1 billion barrelsof crude and condensate supply, data from Kplershowed.
As of May 22, cumulative crude and condensate supply losses in the Middle East had reached 961 million barrels, with the 1 billion mark breached by the end of May.
Outright production shut-ins have also inched higher, with another 100,000 bpd likely to have gone offline in the past week, due to continued pressure in Iraq and Saudi Arabia.
In the Middle East, “seasonally-higher demand is coming, which could incrementally boost regional supply to meet demand, though the economic realities in the region may force some organic demand destruction as well, capping any summer-linked marginal increase in production levels,” Kpler’s Naveen Das wrote last week.
Amid the massive supply disruption, inventories are declining at an increasingly faster pace,includingin the United States.
Excluding China, which has accumulatedlarge buffer stocksof more than 1.2 billion barrels over the past year, the rest of the world has seen onshore stocks draw at an accelerating pace, according to Kpler.
| Product | Price | Change |
|---|---|---|
| Brent Crude | $102.14/bbl | +0.34% |
| WTI Crude | $96.90/bbl | +0.21% |
| EN590 Diesel | $846/MT | +0.18% |
| Jet Fuel A-1 | $1090/MT | +0.55% |
| Mazut M100 | $450/MT | -0.15% |
| Bitumen 60/70 | $470/MT | +0.08% |
| Sulphur Gran 99.5% | $470/MT | -0.44% |
| Urea 46% Gran | $650/MT | +1.12% |
| NPK 16-16-16 | $460/MT | -0.28% |
| Nat Gas TTF | $15.42/MMBtu | +0.92% |
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