Many folks in the energy industry both foreign and domestic were flabbergasted by what they felt were reckless comments about Israel attacking Iranian oil facilities. The crude oil price had the biggest one day up move in over a year after Biden said as reported by the Wall Street Journal: “Asked if he would support Israel attacking Iran’s oil facilities,” Biden replied, “We’re discussing that,” before adding “I think that would be a little…” and trailing off.
Biden added that the U.S. advises the Israeli government on military operations but doesn’t dictate them.
“And there’s nothing going to happen today,” Biden said.
“We’ll talk about that later according to the WSJ. It was also reported that when asked if he was worried an Israeli strike on Iran’s oil facilities would raise oil prices,” he said, “If a hurricane hits, prices are going to go up. I don’t know, who knows.”
This offhand comment angered many industry insiders as well as our allies as the comments set off a firestorm in global energy markets and came a day after Biden said that he did not support Israel attacking Iran’s nuclear facilities. Maybe this is a genius misdirection as Iran is already hunkering down and preparing its oil infrastructure for a strike while the real target are their nuclear facilities. But as Biden said, “I don’t know, who knows.”
TankerTrackers.com Inc. reported yesterday that Iran is taking the threat seriously. They wrote:
“The National Iranian Tanker Company (NITC) appears to be fearing an imminent attack by Israel. Their empty VLCC supertankers vacated the country’s largest oil terminal, Kharg Island, yesterday.”
Today, they said that:
“Although it is too soon to tell, should Iran’s crude oil exports slow down over the coming days (which is possible following a very strong September), then that oil will end up being stored in storage tanks on shore until the country deems it is safe to export more.”
Yet there is growing anger with the way Biden and his administration have handled the global order the last couple of years. Not only did they use the Strategic Petroleum Reserve for purposes other than its intention, the odds of a major price spike if we do indeed see a cut off of Iranian supplies and supplies in the region, are real.
They are also being accused of allegedly trying to manipulate the oil market by releasing fake news. These are the charges made by Zero Hedge yesterday and while there’s no evidence of any truth to that, many people believe that the rash of fake bearish oil stories that we’ve seen over the last few months and years raises significant questions about these unnamed sources and where they are coming from.
Biden’s foreign policy of going easy on Iran also has caused a multitude of problems across the world, especially in the Middle East. Under his watch we’ve seen Iran, flush with billions of dollars released by the Biden administration, support Hezbollah, Hamas and the Houthi rebels.
The failure of the Biden administration to enforce Iranian sanctions has allowed Iran’s oil production to get to full capacity exports have not been thwarted and the regime has prospered under the Biden administration. Now we see a situation where it could lead to a regional war. People who believe OPEC countries like Saudi Arabia and the United Arab Emirates are more than likely to fill the void of Iranian oil supplies may not be correct.
Oil analyst Anas Alhajji said that:
“Anyone who thinks that any officials in the Gulf region will support or be happy if the US and Israel hit Iranian OIL facilities knows nothing about the region!”
Iran’s Ayatollah Khomeini, says that he will not back down against Israel and it’s clear that Iran if attacked is planning on attacking other countries' oil infrastructure in the Middle East.
Iran’s revolutionary guard this morning is saying that if Israel makes the mistake of attacking Iranian oil infrastructure, they will respond by attacking Israeli energy infrastructure. So, if they’re going to attack only Israel’s infrastructure maybe the price spike on an Iranian attack will be short-lived.
If we lose all of Iranian oil exports, it can be made up by other OPEC members. Yet if Iran attacks its neighbor's oil infrastructure, then it’s going to be a whole new ball game and we run the risk of an energy price spike. From this point, I believe that if Israel attacks Iran’s oil infrastructure and takes their production and exports offline, it’s good for at least a $ 10-a-barrel rally.
Normally when we get that type of attack, we’ll get a price spike big spike, and a drop in price as demand takes a hit. Yet if Iran strikes out and takes off other country's oil production, then the price spike will more than likely $20 a barrel range.
Crack spreads made a big move up as the Department of Energy reminds us that diesel demand season is here. The EIA said that they expect distillate fuel oil consumption to increase in the fall as diesel-powered agricultural equipment is used to harvest and transport crops.
The harvest tends to peak in mid-October and continue through November when the start of the winter home heating season also supports distillate fuel oil demand. With early indications that the 2024 harvest will likely be on schedule or slightly ahead of schedule, we expect distillate demand to generally follow the five-year average in 2024.
Natural gas stayed a bit higher after the EIA natural gas stockpiles rose less than expected. The EIA reported an injection of +55 bcf, below expectations of +62 bcf. We did hit a a 3-1/2 month high on forecasts for warmer US weather.