Toes Over the Edge

Global energy (even agriculture) has its toes over the edge of the cliff, an inch from disaster.

HOW MUCH CUSHION IS LEFT?

The SPR is at 282.6 million barrels, the lowest since October 1982. A year ago it held 409.1 million. We flagged that drawdown in The Shortcut Is Gone.

Commercial crude fell for a fourth straight week and is now four percent below the five-year average. Distillates are about 10% below.

THE LIST: PROVERBIAL CLIFF

On October 22, Mohsen Rezaei, secretary of Iran's Supreme National Security Council, said Iran would strike oil facilities, undersea cables, datacentres and AI facilities in as many as seven Gulf countries if the US and Israel attack again (The Guardian).

Days later, an infographic titled “Zero Hour Targets” started circulating with company names on it.

No official has put their name to it.

This is expected.

The political culture in the region tends to float lists like this through semi-official outlets first. Those outlets sit close to the people in power, but they don't speak for them. Publishing there lets the people in power see how markets and other governments react, without committing to anything.

Once the reaction comes back, an official version follows.

We've already seen this happen in this war. On March 14, a list of six Gulf energy facilities was published through the semi-official Tasnim News Agency. Four days later, after strikes on the South Pars gas field, those facilities were declared “direct and legitimate targets.” Ras Laffan's LNG facilities were then hit, and QatarEnergy declared force majeure on some long-term contracts.

In August, the semi-official Fars News Agency published a report naming regional energy facilities as potential targets (Yeni Safak).

This list is the next round.

Here are the oil and gas names on it:

Qatar: QatarEnergy, along with QAPCO, Q-Chem, QAFCO and QAFAC. QatarEnergy runs Ras Laffan, where most of Qatar's LNG is made.

UAE: ADNOC, Borouge and Fertiglobe. ADNOC isn't one plant. It's the national oil company.

Saudi Arabia: SABIC, SADAF, Saudi Kayan, Ar-Razi, Petro Rabigh and SHARQ. That's the Jubail complexes plus a refinery on the Red Sea coast.

Israel: Bazan, Carmel Olefins and Gadiv in Haifa.

Is it a bluff?

History says no.

A Reuters investigation counted 135 attacks on at least 84 Gulf energy sites since February 28.

We've said this many times before. In this war, threats against Gulf energy have usually been carried out.

MINE STRIKES ARE STILL ONGOING

The IRGC said three tankers caught fire after hitting mines, and Iran's army said a fourth burned east of the strait.

AT HOME, NOBODY'S REALLY DRILLING

The rig count was 603 for a fourth straight week.

Producer discipline is the story we've tracked since July, in Per Your Request: Inventories.

The majors aren't adding barrels either. Brent averaged $97 in the third quarter, and Chevron still spent less than a year ago, because it spent less in the Permian (Chevron 8-K).

THE PRICE

WTI settled at $104.12 Friday, up about 15% for October (DTN). This morning both benchmarks fell more than 3% as Iranian and Qatari officials held talks.

The midterms are tomorrow. US and Gulf officials say the war may restart after the elections, though nothing has been announced.

Why should you care?

If any facility on that list goes offline, there isn't much stored supply left to cover the loss. That's like a permanent loss until the conflict actually ends. And don't forget about the counterattack on Iran's infrastructure as well.

Questions about the list or the rig market? Reach out to our team.

Your Oil and Gas team,

Mike Qu, on behalf of CrownForge Energy