Despite the fact that oil prices have slightly retreated from the highest level they have reached since the war between Israel and the Palestinians began on the seventh of October, they still revolve around the barrier of 90 dollars per barrel of benchmark Brent crude.

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Edited by| Christian Megan

 

Economic  section -  CJ journalist

 

World - October,17,2023

 

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As the United States and the countries of the region try to reduce the risk of an expansion of the war or an Israeli ground incursion into the Gaza Strip, fears began to diminish in the markets of calculating the risks to energy supplies from the region, so the rise in prices calmed down.

However, the exchange of warnings and threats this week renewed fears of a possible increase in pressure on the supply side of the oil market, resulting in a return to higher prices, while some factors of pressure on supply in the energy markets, especially for natural gas, remain and negatively affect the supply and demand equation in the global energy market.

According to an extensive analysis by "global commodities insights" of the global credit rating institution "Standard & Poor's", the energy markets have returned to calculate the risks of expanding the conflict or increasing tension between Washington and Tehran and its impact on the Gaza war and the region as a whole.

US President Joe Biden strongly warned Iran days ago against any attempt by Tehran to expand the conflict, coinciding with the US increasing its military presence in the eastern Mediterranean, perhaps apparently as part of deterring any Iranian attempt to expand the scope of the war.

Biden, in a weekend interview with the CBS program "60 Minutes", said when asked about the possibility of Iran expanding the war, warning Tehran, "don't, don't, don't do".

In an interview, Iranian Foreign Minister Hossein Abdollahian warned that "if Israel does not stop its retaliatory attack on Gaza, it will probably open other fronts for war".

According to the analysis of "Global", the damage to supplies remains limited to the eastern Mediterranean so far, namely the suspension of gas supplies from Israel to Egypt through the AMG pipeline, with the diversion of supplies through the "Fajr" pipeline through Jordan after the closure of production from the Tamar offshore natural gas field.

The "AMG" gas pipeline passes through the sea from Ashkelon to El-Arish parallel to the Gaza Strip and through it most of the Israeli gas exports to Egypt are transported.

The markets are also anticipating the possible impact of the expansion of the war and the migration of refugees on the main shipping route for the transfer of energy from the region, the Suez Canal in Egypt, and although that risk has receded significantly now with the postponement of Israel's invasion of the Gaza Strip and the refusal of Palestinians to leave the Strip to Sinai, the risk remains as warned by American consulting firms and investment banks.

The risks of the expansion of the conflict have cast a shadow on the natural gas sector, and some of the decline in supply has already existed since the beginning of the war and is expected to continue for a while, as for oil, the fear of the markets and the risk calculations of investors comes mainly that the possibility of the expansion of the conflict pushed by Iran could disrupt supplies from the gulf in general.

The possibility will initially mean the cessation of a significant amount of Iran's oil exports, and the vice president of "global communications insights" Jim brickhard estimates that the US tightening sanctions again on Iran will prevent the export of half a million barrels per day of Iranian oil. "(US President Joe) Biden will come under increasing pressure to impose sanctions and block Iran's oil export revenues,"he added.

At the same time, the "OPEC+" alliance, which includes OPEC countries and producers from outside, maintains the production cuts agreed upon before. During last September, the Coalition Countries pumped 40.85 million barrels per day, according to the company" Platts " Energy Market Information.

As for the immediate conflict zone, oil supplies remain the same so far, the largest source of Israeli oil imports is from Azerbaijan, Kazakhstan and northern Iraq, and these are the raw materials on which Israeli oil refineries work for the most part, while imports from northern Iraq were disrupted with the cessation of oil pumping from the Kurdistan region to the Turkish port of Ceyhan via the Kirkuk-Ceyhan pipeline due to a dispute between Turkey and Iraq over pricing.

The analysis of the company "Global" predicts that if the conflict expands, this will add another factor to the impact of the war in Ukraine, sanctions on Russia and the reduction of production by the "OPEC+" alliance will put pressure on prices higher.

The benchmark Brent crude has added an increase of 14.5 dollars per barrel since the beginning of this year 2023 so far, and prices are likely to exceed the barrier of 90 dollars per barrel, heading towards 100 dollars per barrel if the war continues and the conflict expands.

As for natural gas prices, the company "Platts" estimates the prices of futures contracts for next December delivery at 18.345 dollars per million thermal units. Natural gas prices had already added 40 percent from the beginning of October before the war to the middle of the month.

As for the infrastructure, there are no energy facilities in the Gaza Strip itself or through it, but Israel stopped production from the Tamar field the day after the start of operations, according to the American company "Chevron", which operates in the field.

A new pipeline project between Israel and Egypt is expected to be affected at a cost of 250 million dollars, in addition, the Israeli refining sector could be severely damaged if the conflict expands and the Lebanese "Hezbollah" enters the war, according to the analysis of the company "Global".

Israel has two refineries, the largest of which is in Haifa with a refining rate of 197 thousand barrels per day, and the second is in Ashdod with a refining rate of 110 thousand barrels per day, and the second operates mainly on northern Iraq crude, whose import through the Turkish port of Ceyhan has been disrupted since March 2023.

Israel relies on the port of Ashkelon for oil import ports for refineries, which has a capacity of receiving about 30 million metric tons of crude oil per year and has a storage capacity of up to 2.3 million cubic meters, as well as the port of Eilat with a storage capacity of 1.4 million cubic meters.

Haifa, Ashdod, Ashkelon and Eilat are connected by a network of pipelines that could be at risk if the war continues and the conflict expands.indeed, oil operations at the ports of Ashkelon and Ashdod were affected by the latter operations, but Haifa and Eilat remained operating at normal capacity.