Oil prices rose sharply yesterday, at a time when Iran is intensifying its attacks on oil facilities and tankers in the Middle East, which has increased fears of a prolonged conflict as well as a prolonged disruption of crude flows through the Strait of Hormuz. During trading, Brent crude futures jumped $5.95, or 6.47 percent, to $97.93 per barrel, after exceeding $100 per barrel early in trading. US West Texas Intermediate crude rose $5.25, or six percent, to $92.50.
Brent reached $119.50 a barrel on Monday, the highest level since mid-2022, then fell after US President Donald Trump said that the Iran war could end quickly.
The Gulf states reduced their oil production by at least 10 million barrels per day, mainly because transportation traffic through the Strait of Hormuz has almost stopped.
Yesterday, Dubai’s crude oil, the benchmark in the Middle East, jumped to more than $50 per barrel, its highest level in at least 8 years, after Iran escalated its attacks on oil and transportation facilities in the Middle East. Oman and Murban crude also rose.
On Wednesday, the International Energy Agency announced the largest coordinated emergency release of strategic petroleum reserves in its history, drawing 400 million barrels from the reserves of major industrialized member states, in an attempt to contain an oil supply crisis that has hit global energy markets since the United States and Israel launched military operations against Iran on February 28.
This decision marks the sixth time in the agency’s history since its founding in 1974, following the Arab oil embargo, that the emergency response mechanism has been activated. The previous record was 182 million barrels released in 2022 following the comprehensive Russian invasion of Ukraine. The latest announcement more than doubles that number.
The International Energy Agency said that the war in the Middle East is causing the largest disruption to oil supplies in the history of global markets.
The agency stated, in its latest monthly report on the oil market, that the Arab Gulf states reduced their total oil production by no less than 10 million barrels per day as a result of the war, equivalent to about 10 percent of global demand.
John Evans, an analyst at BVM, said that the market is dealing with the International Energy Agency’s decision regarding the withdrawal with caution due to the lack of clarity in its timeline, adding that it is supposed to extend over a period of 90 days, which is equivalent to about 4.5 million barrels per day. Before the outbreak of war, about 20 million barrels of oil passed through the strait on a daily basis. Now, the quantities passing through it have become very small, and the possibilities for circumventing this waterway are limited.
Goldman Sachs expects the average price of Brent crude to reach $98 per barrel in March and April, before falling to $71 by the last quarter of the year. But he warned that another, more pessimistic scenario that assumes the disruption of oil shipping traffic through the Strait of Hormuz for a month, means that the average price could rise during March and April to $110.
Companies specialized in maritime security and risk assessment said that Iranian boats loaded with explosives attacked two fuel tankers in Iraqi waters, causing them to catch fire and killing one of their crew members on Wednesday, after projectiles hit four ships in the Gulf waters.
Sources reported yesterday that China ordered an immediate ban on refined fuel exports in March, in an additional proactive step in anticipation of any fuel shortages at home due to the war.
