Oil prices rise sharply as attacks in Middle East disrupt global energy supply
NEW YORK: Oil prices rose sharply on Monday as US and Israeli attacks on Iran and retaliatory strikes against Israel and US military installations around the Gulf caused disruptions to the global energy supply chain.
Traders were betting that the supply of oil from Iran and elsewhere in the Middle East would slow or grind to a halt. Attacks throughout the region, including on two vessels travelling through the Strait of Hormuz, the narrow mouth of the Persian Gulf, have restricted countries’ ability to export oil to the rest of the world. Prolonged attacks would likely result in higher prices for crude oil and petrol, according to energy experts.
West Texas Intermediate, the light, sweet crude oil produced in the United States, was trading at about $72 a barrel early on Monday, up around 7.3% from about $67 on Friday, according to data from CME Group.
A barrel of Brent crude, the international standard, was trading at $78.55 per barrel early on Monday, according to FactSet, up 7.8% from its trading price of $72.87 on Friday, which had been a seven-month high at the time.
Higher global energy prices could lead to consumers paying more for petrol at the pump and shelling out more for groceries and other goods, at a time when many are already feeling the impacts of elevated inflation.
Roughly 15 million barrels of crude oil per day — about 20% of the world’s oil — are shipped through the Strait of Hormuz, making it the world’s most critical oil chokepoint, according to Rystad Energy. Tankers travelling through the strait, which is bordered in the north by Iran, carry oil and gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the UAE and Iran.
Iran had temporarily shut down parts of the strait in mid-February for what it said was a military drill, which led oil prices to jump about 6% higher in the days that followed.
Against that backdrop, eight countries that are part of the OPEC+ oil cartel announced they would boost crude production on Sunday. The Organisation of the Petroleum Exporting Countries, in a meeting planned before the war began, said it would increase production by 206,000 barrels per day in April, which was more than analysts had been expecting. The countries boosting output include Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman.
“Roughly one-fifth of global oil supply passes through the Strait of Hormuz, a vital artery for world trade, meaning markets are more concerned with whether barrels can move than with spare capacity on paper,” said Jorge León, Rystad’s senior vice president and head of geopolitical analysis, in an email. “If flows through the Gulf are constrained, additional production will provide limited immediate relief, making access to export routes far more important than headline output targets.”
Iran exports roughly 1.6 million barrels of oil a day, mostly to China, which may need to look elsewhere for supply if Iran’s exports are disrupted, another factor that could increase energy prices.
By RSS/AP
