Middle East Attacks Continue Amid Global Economic Warnings

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Written by Daniel Graeber for IIR News Intelligence (Sugar Land, Texas)

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Summary

Crude oil prices returned to rally mode on Monday as fighting escalated in the Middle East. That followed warnings from international agencies that the war was taking a toll on the global economy.

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Fighting Continues

After global concerns were issued about the sweeping economic impacts of a war raging now for three months, crude oil prices rallied amid military strikes from Israel, Iran and the United States on Monday.

Industrial Info Resources continues to monitor major war developments impacting the energy sector. According to Industrial Info Resources data, on Monday, Kar Group opted to delay the restart of a crude-distillation unit at its Erbil Refinery, which can process 160,000 barrels per day (bpd) in the semiautonomous north of Iraq. In the United Arab Emirates, meanwhile, the Abu Dhabi National Oil Company (ADNOC) postponed the opening of a condensate splitter at the Ruwais Refinery 1 (East), which can handle 400,000 bpd. Both could be back in service by July. The Industrial Info Resources Global Market Intelligence (GMI) Refining Plant Database offers key details--including capacities, maintenance schedules and necessary equipment--in profiles of the Erbil and Ruwais refineries.

Industrial Info Resources is tracking progress at 142 operational crude oil refineries across the U.S., which are home to more than $20 billion worth of active and proposed projects. Readers can learn more from a detailed list of plant profiles and project reports.

While May ended with signs of a tentative peace agreement, June began with renewed military activity that followed a deep Israeli incursion into Lebanon in violation of previous ceasefire agreements. On Monday, the U.S. military said it struck Iranian military sites after the Iranian side downed a U.S. drone, with Iran hitting American forces stationed in Kuwait.

Brent crude oil, the global benchmark for the price of oil, was up nearly 3% in pre-market trading on Monday to trade near $93 per barrel. It had traded higher than $115 during the worst of the fighting. The dip in prices, meanwhile, is spilling over to the consumer level, where travel club AAA posted a national average price of $4.33 for a gallon of regular unleaded, down from week-ago levels of $4.50.

Globally, Iran said through its official Islamic Republic News Agency that three fields in the South Pars complex returned to normal operations after it was bombed in April.

By the Numbers

• $93 for crude oil
• $4.33 for gasoline

The New Normal?

But last week, the heads of the International Energy Agency, International Monetary Fund, World Bank Group and the World Trade Organization met to discuss the ongoing impact from the tacit closure of the Strait of Hormuz, through which much of the world's waterborne trade moves.

Global leaders warned that everything from fuels to fertilizers are impacted, causing lasting damage to the world's economy.

"If shipping flows do not return to normal, continued rapid depletion of global oil inventories ahead of peak summer oil demand in the Northern Hemisphere would present increasing risks for fuel security, market conditions, and broader economic resilience," they warned.

While the U.S. economy is largely insulated from the direct impacts of the war, its data serves as a bellwether for global issues. U.S. federal data showed commercial crude inventories declined 3.3 million barrels during the seven-day period ending May 22, leaving storage levels at 2% below the five-year average for this time of year.

"Global oil inventories are being drawn down at a record pace in response to the major loss of supply through the Strait of Hormuz," the global economic heads stated last week.

A handful of speeches are expected early this week from officials at the U.S. Federal Reserve, who said last week that elevated crude oil prices are creating downside risks to growth and upside risks to inflation. A gauge of inflation at the wholesale level in the European Union is expected on Tuesday.

Key Takeaways

• Ceasefire talks fade amid renewed fighting.
• The global economy cannot take much more.

About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, Industrial Info Resources is tracking over 250,000 current and future projects worth $30.2 Trillion (USD).