Maritime Traffic Spared, But Refineries Hit in Iran/Israel War

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--While IIR Energy continues to monitor the status of oil refineries in the Middle East, the U.S. said regional waterways are at risk, but open for cargo.

The price for Brent crude oil, the global benchmark, was up some 2% at the start of trading Tuesday on Wall Street to move near the $75-per-barrel mark, the highest level since late April. Crude oil prices had been in retreat for much of the second quarter amid concerns that protectionist trade policies from the U.S. would throttle global growth.

Israel's surprise attack on Iran last week added a substantial risk premium to the price of oil, however. The International Atomic Energy Agency (IAEA), meanwhile, said many of the above-ground portions of Iran's nuclear research program had been destroyed, and underground centrifuges at Natanz may have been damaged as well.

Israel lacks the penetrating bunker-buster bombs that would be necessary to completely destroy Iran's program, which Iran says is for peaceful civilian purposes. The energy sector, meanwhile, was targeted on both sides of the conflict.

In a notice to clients on Tuesday, IIR Energy said that Oil Refineries Limited shuttered its refinery in Haifa, sidelining about 197,000 barrels per day (BBL/d) in processing due to a power outage sustained during an Iranian missile strike. It could be down until at least June 25. Subscribers to Industrial Info's Global Market Intelligence (GMI) Petroleum Refining Plant Database can read a detailed plant profile.

In Iran, meanwhile, the Tabriz Oil Refining Company cut operations at its 115,000-BBL/d Tabriz Refinery by 30% after storage tanks were damaged by Israeli missiles. It also could be limited until the end of June, assuming no further damage. Subscribers can read a detailed plant profile.

The potential impact, meanwhile, is lopsided heavily toward Iran, with 1.5 million BBL/d at risk, compared with Israel's 197,000 BBL/d.

Click on the image at right for a graph showing potential impacted refinery capacity.

Elsewhere, U.S. naval assets may be repositioning to regional waterways as the conflict escalates. While Iran's energy trade is limited by sanctions, the Persian Gulf is among the busiest maritime arteries in the world, carrying about 20%--or about 20 million BBL/d--of the global oil trade, according to the U.S. Energy Information Administration (EIA).

Attacks last year from Houthi rebels in Yemen threatened maritime channels in the region, and Dryad Global, a maritime risk group, said last week that shippers continue to avoid the Red Sea and are opting for the longer route around Africa. On June 11, meanwhile, the U.K. Maritime Trade Operations (UKMTO) office said it's aware of the potential for "an escalation of military activity" in the Middle East, some two days before Israel launched its attack.

On Monday, UKMTO said that it noticed an uptick in electronic interference in the Persian Gulf that may require mariners to rely on back-up navigation methods. Two vessels collided off the coast of Fujairah on Tuesday, though the British maritime authority said there was no indication this was a result of regional conflict.

Apart from that, it appears traffic is moving through the Persian Gulf with few problems, the EIA found.

U.S. President Donald Trump left a meeting of the G7, hosted by Canada, early this week, presumably to deal with the Middle East conflict. NATO leaders convene next week.

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, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).