Israel-Hamas war puts Iran’s oil production and exports at risk
November 6, 2023
The Baker Hughes Rig Count had oil rigs down 8 to a total of 496 and last year at time there were 613 oil rigs.
The Bureau of Labor Statistics reported that there were only 150,000 new jobs created in October which was less than 170,000 expected. There was also an unexpected tick up in the unemployment rate to 3.9% from 3.8% and the labor force participation rate also unexpectedly fell from 62.85% to 62.7%. Some are saying the unemployment rate jump was from the auto workers being on strike.
US Navy warship intercepted multiple missiles and drones that were fired by Iran-backed forces in Yemen. Oil tanker disruptions through the Strait of Hormuz are the biggest concerns. If the US confirms that Iran aided the Hamas Terrorist attack on Israel, the US is expected to enforce oil sanctions in place against Iran. Saudia Arabia is holding off on US backed plans to normalize relations with Israel due to the recent conflict. The concern for energy markets is that the war could escalate to other OPEC members and possibly disrupt oil supplies. JPMorgan in a company research note told clients that despite all the threats of blocking the Strait over the years it has never been shut down. This is a dose of reality but of course there will be those that say this time could be different. If any war or unrest spreads, whether the Strait get shut or not the initial reaction from the market will be higher.
ANZ Research said the Israel-Hamas war puts Iran’s oil production and exports at risk. It expects Saudi Arabia’s voluntary cuts to remain in place this year, creating a market deficit of 2 million bpd in the fourth quarter. It said any broadening of conflict could threaten 20 million bpd of supply through the Strait of Hormuz and push prices toward $120 per barrel.
European Central bank board member, Isabel Schnabel, said armed conflict in the Middle East is likely to have only limited impact on global energy prices, provided that hostilities do not spread further. She said if of course the conflict widened, in particular if Iran was involved, the situation could change quickly.