Hamas, the war and the geo-economic scenario on oil and gas
The war between Hamas and Israel does not seem, for the moment, to have upset the oil market. However, it could have more important repercussions on gas: here's why
The war between Hamas and Israel in the Gaza Strip has not had, at least so far, an impact on oil supplies, but has caused prices to rise: on Monday, two days after the Palestinian organization launched an attack on Israeli territory , the prices per barrel of the two main international references, Brent and WTI, grew by 4.2 percent (to 88.1 dollars) and 4.3 percent (to 86.3 dollars) respectively.
THE IMPACT OF THE HAMAS-ISRAEL WAR ON OIL
However, there have been no direct consequences on the supply of oil because neither Israel nor Palestine are significant producers: the output of the Palestinian territories is practically nil, and the Israeli output is also minimal .
Things could change if the conflict spreads to the rest of the Middle East, a region which – reports Axios – is worth a third of the world's crude oil supply. Hamas, in particular, is supported by Iran, the seventh largest oil producer. The Iranian regime has denied any involvement, but celebrated the Palestinian attack as an act of "self-defense."
BECAUSE IT WON'T BE A NEW 1973
There are those who fear that the war in the Gaza Strip could replicate the scenario of 1973, when OPEC (the Organization of the Petroleum Exporting Countries, of which Iran is a member) caused an energy crisis through an oil embargo against the governments allied with Israel, which had been attacked by the armies of Egypt and Syria in the Yom Kippur War.
Such a situation, however, seems unlikely today: the world has changed a lot since 1973, relations between Israel and its neighbors are not the same as they were then, the Palestinian issue has lost importance in the Middle East and Arab countries do not seem interested in harming Israel , starting from Saudi Arabia. Indeed, negotiations are underway between Tel Aviv and Riyadh – mediated by the United States – for the normalization of bilateral relations , in the wake of the agreements already reached by Israel with the United Arab Emirates, Sudan, Morocco and Bahrain.
WHAT COULD HAPPEN
What could happen is that the United States, Israel's main ally, decides to tighten oil sanctions on Iran, reducing the availability of barrels on the market. Alternatively, or in response, Iran could attack oil sites in Saudi Arabia or block the Strait of Hormuz, a key crossing point for maritime crude oil trade.
CONSEQUENCES LIMITED
The overall limited increase in oil prices means – according to the Financial Times – that the market does not expect major upheavals, even in the event of retaliation against Iran. The country produced three million barrels a day in July, the highest level since 2018, and about 80 percent of its output ends up in China. It is very unlikely that any Western sanctions on Iranian crude would alter this trade, which takes place outside the dollar-based financial system. And then, in the event that Israel were to launch a military operation against Tehran and compromise its oil production, the quantity of barrels that would be removed from the market would be roughly 3 percent of the total. Perhaps more relevant for the supply-demand balance are the production cuts of one million barrels per day that Saudi Arabia will continue until December .
WHAT ABOUT GAS?
More than on oil, the war in the Gaza Strip could have significant repercussions on natural gas. In fact, on Monday, for security reasons, the Israeli government ordered the temporary suspension of activities in the Tamar field: it is located in the eastern Mediterranean Sea and is managed by the US company Chevron.
In August, Israel announced that it would increase exports of gas extracted from Tamar to Egypt, with the aim of both improving relations with its neighbor and strengthening its role as an energy supplier in the region . Today, according to Bloomberg , Israeli gas shipments to Egypt have reduced by 20 percent.
The Tamar gas field consists of six wells, with an output of between 7.1 and 8.5 million cubic meters per day.
The news of the stop in the field is very relevant for Europe because part of the Tamar gas that Israel resells to Egypt is exported to the Old Continent. Upon hearing the news, European gas prices rose by 14 percent (today they are around 46 euros per megawatt hour). Such sensitivity is due to the fact that the European Union needs all possible supplies of fuel to compensate for the collapse of imports from Russia, which satisfied a large part of the community's needs before the invasion of Ukraine. European gas storages in view of the cold season, however, are 90 percent full .
Israeli gas production continues at Leviathan , a large offshore field southwest of Tamar. Eni, together with the French TotalEnergies and the Qatari QatarEnergy, participates in the search for hydrocarbons in the waters of the eastern Mediterranean.
PROBLEMS IN VIEW WITH ALGERIA AND QATAR?
Beyond Israel and Egypt, the gas problems for Europe and Italy could also concern Algeria (our main supplier, after the separation from Russia) and Qatar (a very important exporter of liquefied gas). The two countries have close relations with Palestine and Hamas, and oppose the ongoing normalization between Israel and the Arab bloc.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/guerra-hamas-israele-effetti-petrolio-gas/ on Tue, 10 Oct 2023 14:16:51 +0000.