Daily Energy Report
Iran crude production, Russia restores refining, oil traders calm, House bill on Iran/China sanctions, China crude storage, , US tries to cripple Russia LNG, and more.
Iran
Check out a short audio here: Iran, Israel, and the Oil Market
Chart of the Day: Iran’s Crude Oil Production
Summary
Figure (1) shows Iran’s oil production markedly increasing in the last two years despite sanctions. Looking at last month’s crude production, it reached 3.188 mb/d, higher than production a year earlier by 611 kb/d. Since early 2021, production has increased by about 1 mb/d.
Bloomberg: Oil Traders Keep Calm Even as Iranian Missiles Fly
Summary
Despite the potential for Middle East tensions to disrupt oil markets, following an Iranian drone-and-missile attack on Israel, prices have remained relatively stable. Traders seem to believe the attack is a limited response rather than an escalation to wider conflict. There's confidence that OPEC+ can compensate for any supply issues with their spare capacity, and the market is accustomed to Middle East conflicts not significantly affecting oil supplies.
EOA’s Main Takeaways
We now know the media and some analysts exaggerated the impact of the Iranian attack on Israel on the oil market. Oil prices declined slightly today. But the main story is that the price did not increase and did not increase significantly.
However, risks to oil installations and tankers in the region remain. The danger is not from the government of Iran but from some fringe groups that support Iran, even individuals who are not affiliated with any groups. Most of the risk stems from the reaction to the strong support of the United States and European countries to Israel. Some people in the Arab world were angered by what they called the double standard since most of the countries did not condemn the Israeli attack on the Iranian Consulate in Damascus. Hence, the risk now is from loose groups and individuals, not the officially-affiliated groups.
Will the Biden Administration tighten oil sanctions on Iran because of its attack on Israel? In our view, any tightening of sanctions will not involve oil. The Biden administration doesn’t want oil prices to go higher before the elections. However, Biden will be under pressure from Republicans to do something: House plans raft of Iran sanctions votes after attack on Israel
None of these bills will become law unless Biden signs them. He might end up imposing sanctions, but again, with no impact on the flow of Iranian oil.
What about after the election? If Biden wins, we believe he will want to continue appeasing Iran for several reasons, including its role in Yemen, Lebanon, Syria, and Iraq. He also wants to reach some sort of a nuclear deal.
If Trump wins, we believe he will tighten the sanctions during his first week in office. Initially, the impact would be limited, but will get larger over time. Details are in the link on top of this page.
Story of the Day
Reuters: Russia Restoring Oil Refining Capacity Knocked Out by Drones
Summary
Russia has quickly repaired its oil refineries damaged by Ukrainian drone strikes, reducing the impacted capacity to 10% from an earlier 14%. Despite challenges in obtaining Western expertise, Russia has restored key refining units, diminishing the daily idled capacity from 907,000 to 660,000 barrels. No recent successful attacks on major refineries have been reported.