Risk of Oil Supply Disruption ‘Significantly Heightened’ Following Strikes Against Iran: Lipow Oil Associates

Crude prices appear poised to jump when trading reopens Sunday evening after joint U.S. and Israel strikes against Iran, raising the risk of a broader supply shock in the Middle East, said Andy Lipow, President of Houston-based Lipow Oil Associates.

While it’s too early to tell if there will be any crude oil supply disruptions, Lipow said the strikes against Iran have “significantly heightened” the risk of such an occurrence, with potential effects for crude flows into California and the broader global market.

Lipow said it remains unclear whether Iran will retaliate against oil assets in the Middle East but warned the oil market’s worst-case scenario would be attacks on Saudi oil infrastructure combined with a closure of the Strait of Hormuz, a strategic waterway that connects the Persian Gulf to the wider Indian Ocean. Close to one-fifth of the world’s oil supply passes through the gulf.

“I would expect if the strait was closed you would see the United States, as well as the European Union and other countries, release their strategic stockpiles,” Lipow said.

That type of interruption would be felt far beyond the West Coast, Lipow said, requiring a rapid “reshuffling” of supply worldwide and potentially tightening crude availability for California refiners that have relied on Middle Eastern barrels.

For the West Coast, policymakers could also consider a Jones Act waiver to move crude or petroleum supplies from the Gulf Coast to the West Coast more easily, Lipow added.

California in 2024 received 21 percent of its crude oil from Iraq, 5 percent from Saudi Arabia and 4 percent from the United Arab Emirates, according to California Energy Commission data.

Futures trading is halted over the weekend so any immediate price reaction won’t be visible until markets reopen Sunday evening. Lipow said he expects crude prices to rise by roughly $3 to $5 a barrel when trading resumes, though he cautioned it is “too early to tell” the extent of any supply disturbance as the conflict is still developing.

Reporting by Bayan Raji, braji@opisnet.com; Editing by Rachel Stroud-Goodrich, rstroud-goodrich@opisnet.com