New Delhi: Crude prices topped $119 a barrel Thursday as attacks on key Gulf energy assets raised fears that the current markdisruptions could outlast the escalating Iran conflict.
After Israel struck Iran’s South Pars gas field-the world’s largest-Tehran responded with a barrage of missile and drone attacks on energy facilities of its neighbours. These attacks caused “extensive damage” to Qatar’s LNG plants, the world’s largest LNG complex and a source of 47% of India’s gas imports.
Saudi Arabia’s refinery at the Red Sea port of Yanbu was also targeted, briefly suspending loadings at a hub that has become a key alternative supply route including for India since the closure of the Strait of Hormuz. A fire was also reported at a refinery unit in Kuwait. The intensifying war has heightened concerns among Indian policymakers and industry, prompting preparations for a prolonged period of supply crunch and higher energy prices.
Rising Costs Worry Refiners
Rising costs are increasingly worrying refiners, who have so far been unable to pass them on to retail consumers of petrol and diesel, according to industry executives. The government has not been in favour of refineries raising prices, given the companies’ strong balance sheets and elections in some states due next month, the executives said. There are also concerns that passing on the higher energy costs could trigger an inflationary cycle with broader implications for economic growth, the executives said.
“Till now, there is no price increase,” said Sujata Sharma, joint secretary in the petroleum ministry, responding to a query on a possible increase in retail fuel prices.
Benchmark Brent, which averaged $71 per barrel in February, was trading at $108.8 at the time of going to print. The Asian spot LNG marker JKM nearly doubled to more than $20 per Mmbtu from a February average of $11. On Thursday, the European gas benchmark TTF rose around 25%.
Qatar’s LNG facilities had already been shut two weeks ago after an initial wave of Iranian attacks, but the latest damage is likely to keep them out of the market for much longer, even after hostilities end, said industry executives. Further attacks on Yanbu port that disrupt loadings could deepen the oil supply crunch, they added.
ALTERNATIVE SOURCES
“There is a war and there is an impact of it,” said Sharma, without directly responding to what the latest escalation in West Asia means for India. She assured that Indian refineries currently have adequate crude supplies and that refiners are also seeking crude and LNG cargoes from alternative sources.
The government has directed all oil and gas companies to furnish any information related to their operations to the Petroleum Planning and Analysis Cell (PPAC), an oil ministry arm, as and when sought. “No entity shall refuse to furnish information required under this notification on the ground that such information is commercially sensitive or proprietary,” the government said.
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