While neither side has reported evidence of damage to energy infrastructure, the attacks ratchet up oil risks in a conflict that has already hit production and all but closed the Strait of Hormuz, sending crude prices soaring more than 40%. The International Energy Agency said this week the war had already created the largest supply disruption in the history of the oil market.
Iran is heavily reliant on Kharg Island, which processes about nine out of every 10 barrels of its crude exports — the vast majority of which end up in China.
“It’s Trump trying to escalate in order to de-escalate,” said Rachel Ziemba, a senior fellow at Center for a New American Security. “The biggest risk to oil markets, and the war, is whether Iran retaliates.”
Absent further strikes, the impact on oil supply may well be limited if the island’s loading jetties, storage tanks and pipelines remain intact, JPMorgan Chase & Co. analysts including Natasha Kaneva wrote in a note published after the attack. That would leave the nation’s export capacity at about 1.5 to 1.7 million barrels a day.
However, it raises the stakes in a conflict that has so far largely spared oil infrastructure in the region. The Ras Tanura export terminal and the Abqaiq processing hub in Saudi Arabia, as well as the Fujairah oil hub in the United Arab Emirates, are seen as “critical, highly vulnerable energy nodes,” the JPMorgan analysts said.
If Kharg Island were to be taken offline, it would rapidly trigger upstream production cuts and put as much as half of Iran’s oil output at risk, JPMorgan said in an earlier note dated March 8. Iran, which had previously been expected to be among the last of the Persian Gulf producers to shut in, could move ahead of Kuwait and the UAE, the bank said.
“I suspect cargo ships will be hesitant to load cargoes when the island is under such a direct threat of military attack from the US,” said Bob McNally, president of Rapidan Energy Group, a Washington-based consulting firm. “That is especially the case if Iran is still disrupting Strait of Hormuz traffic.”
Traffic through the Strait of Hormuz has been at a virtual standstill for two weeks, with no confirmed transits in either direction on Friday, according to vessel-tracking data compiled by Bloomberg.
–With assistance from Weilun Soon, Ari Natter and Yongchang Chin.
Disclaimer: This report is auto generated from the Bloomberg news service. ThePrint holds no responsibility for its content.
