Israel crisis upends crude requirements, impacts region’s gas and power

A seasonal jump in Israel's crude oil imports looks set for a sharp contraction, tanker traffic data showed June 19, with both Israeli refineries out of action after an attack shuttered the Haifa plant. A reduction in Israeli gas production for safety reasons is also seen affecting regional oil flows.

Crude deliveries into Israel, mainly from Caspian producers Azerbaijan and Kazakhstan, were seen rising in line with summer demand prior to the onset of the full-scale conflict between Iran and Israel on June 13, and a missile attack that cut power to the 197,000 b/d Haifa refinery, the country's largest.

Haifa should be back online in "a few weeks," energy and infrastructure minister Eli Cohen said subsequent to the shutdown announcement.

The 110,000 b/d Ashdod refinery is out of action for maintenance begun earlier, its operator, Paz Group, said.

With the country scrambling to find alternative fuel sources, crude imports are set to fall from 449,000 b/d in the current week to just 86,000 b/d in the week commencing June 23, with the latter supply set to arrive from Gabon, according to ship tracking data from S&P Global Commodities at Sea. The CAS data is based both on satellite tracking and detailed information from sources in the region.

The surge in crude imports before the fighting was set to involve the relatively rare use of the Ashkelon import terminal, which has been sidelined since the Oct. 7, 2023 Hamas attack on Israel, likely reflecting its proximity to Gaza and attendant security concerns.

For the time being, the market for Azeri Light and Kazakhstan's CPC Blend appears robust -- although traders have been speaking of a slowdown, with one referring to "quieter" days and a "wait and see" situation.

Azeri Light was last assessed by Platts at a $3.50/b premium to Dated Brent on a CIF Augusta basis, while CPC Blend was assessed at a $1.20/b discount to Dated Brent on a CIF Augusta basis -- respectively 5 cents/b weaker, and unchanged on the previous session.

Regional gas impacts

Israel's decision to shutter some of its flagship offshore gas fields as a safety measure has also affected the oil market as the country is normally the main import source for Egypt's gas needs -- Egyptian gas demand usually surges in summer to meet air conditioning and cooling needs.

Absent Israeli gas, Egypt becomes reliant on domestic gas production, LNG, hydropower from the Aswan Dam, or switching its power plants to burn fuel oil -- and imports of the latter have duly surged, according to CAS data.

In the current week, Egypt was set to import 604,000 b/d of fuel oil, up 333,000 b/d week-on-week, with the average set to fall back to 470,000 b/d in the week commencing June 23, the data showed.

Israeli energy minister Cohen, speaking June 18, said the needs of the domestic gas market would be prioritized, with no shortages of electricity reported in Israel as a result, and that gas exports were suspended. On June 13, Israel ordered the suspension of operations from the Leviathan and Karish gas fields, with a resumption of production expected to require military clearance.