Rystad Energy analysis on worst-case scenario for Middle East crude output

26 Mar Rystad Energy analysis on worst-case scenario for Middle East crude output

(Oilandgaspress) -Of the region’s 21 million bpd pre-conflict base, excluding Iran, only 14 million bpd remains at current levels, a reduction of 33% in just over a week. But the 14 million bpd figure is not secure. It contains two categories of supply that carry very different risk profiles.

The first is supply that is actively at risk of further curtailment. Kuwait and Iraqi fields account for about 1.5 million bpd of output that remains online only because domestic refinery feedstock needs provide a temporary floor. Kuwait’s refineries have a combined capacity of 1.42 million bpd, but domestic demand absorbs only 360,000 bpd, and with no export routes, oil product storage is also filling rapidly even at reduced throughput rates. When those tanks fill up, runs will have to be cut further, and with them, the crude supply needed to feed them. The floor is not fixed – it keeps dropping.

The second category is supply that is bypass-dependent – approximately 6.5 million bpd – that can only continue to reach export markets via the UAE’s ADCOP pipeline to Fujairah and Saudi Arabia’s East-West pipeline to Yanbu. This supply is physically moving as of March 13, but it is moving through infrastructure that has already been subject to attack. Case in point is Fujairah, where loading capacity and tanker availability constraints remain.

In Saudi Arabia, the grade implications are as significant as the loss of volume. Arab Heavy and Arab Medium together account for the overwhelming majority of the 2.2 million bpd offline – these are the workhorse grades for complex Asian refineries configured around medium-to-heavy sour diets. Saudi Arabia is still offering Arab Light and Arab Extra Light via Yanbu spot tenders, but Arab Medium has effectively disappeared from the market.

Refineries that cannot substitute lighter grades without configuration penalties are now competing for long-haul heavy alternatives from the Americas and West Africa – adding freight cost, lead time and feedstock uncertainty to an already stressed market. Additionally, if Iranian barrels are eliminated from the market due to sustained attacks on its oil and gas infrastructure, their ideal replacements, Arab Heavy and Arab Medium, would no longer be on the table.

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