As the oil supply chain in the Gulf region is greatly shaken in the aftermath of the war between the United States, Israel, and Iran, international oil prices are soaring to a level close to $120, exceeding the psychological resistance level of $100 per barrel.
On the 9th, the price of West Texas Intermediate (WTI) crude oil (WTI) futures for April delivery on the New York Mercantile Exchange recorded $107.54 per barrel, up 14.85% from the previous price as of 7:26 a.m. Korean time. The WTI futures price continued its upward trend, rising to $119.48 at 11:33 a.m. on this day, but falling to $109.08 as of 2:50 p.m. This is the first time since July 2022 that the price of WTI has exceeded $100 per barrel.
Brent crude oil futures, the standard for international oil prices, were also traded at $107.54 per barrel, up 14.85% on the ICE Futures Exchange in London, England, as of 7:26 a.m. Korean time. Brent crude oil also soared to $119.50 at 11:33 a.m. on this day and stood at $111.59 as of 2:50 p.m.
The Financial Times (FT) reported that if the price of Brent crude oil futures remains above $112.17 on this day, it is expected to record the largest daily increase since June 1988 when futures began trading.
As passage through the Strait of Hormuz, a key passage for global crude oil transportation, is blocked, storage facilities in major oil-producing countries are quickly reaching saturation, leading to production cuts, adding to market confusion.
Crude oil logistics are virtually paralyzed. Bloomberg reported that the only ships that have passed through the Strait of Hormuz in recent days have been Iranian-linked oil tankers and two bulk carriers known to be Chinese-owned.
According to energy consulting firm Kfler, oil tanker traffic through the Strait of Hormuz decreased by 90% in the week following the US-Israeli airstrike on Iran on the 28th of last month.
As export routes through Hormuz are blocked, oil-producing countries in the Middle East whose storage space is full are beginning to cut production in earnest as a desperate measure.
Reuters, citing sources, reported that the amount of crude oil produced from Iraq’s major southern oil fields has decreased to 1.3 million barrels per day, one-third of the previous level.
Iraq’s crude oil exports also plummeted. Daily exports, which were around 3.33 million barrels last month, also decreased to 800,000 barrels on this day. As passage through the Strait of Hormuz became impossible, only two oil tankers succeeded in loading.
Reuters reported that exports from Iraq are expected to completely stop around 8 p.m. local time.
Natasha Kaneva, an analyst at JP Morgan Chase, said in an interview with the Wall Street Journal (WSJ), “Even if you look at the entire written history, the Strait of Hormuz has never been completely blocked. This is not a worst-case scenario, but a situation that was previously unimaginable appears to have become a reality.”
The market expects the upward trend in oil prices to continue. Goldman Sachs warned in a recent investor note that if the flow of crude oil through the Strait of Hormuz does not improve, international oil prices could reach $150 per barrel by the end of this month.
Goldman Sachs pointed out, “If oil production in the Strait of Hormuz remains low throughout March, crude oil prices, especially refined oil prices, are likely to exceed the 2008 and 2022 highs.”
Clayton Siegl, a senior researcher at the Center for Strategic and International Studies (CSIS), a U.S. think tank, analyzed, “The grace period that the market granted to the Trump administration ended last weekend.”
He said, “The supply shortage of 20 million barrels a day is having a negative impact on the balance of the global crude oil market, and there are no signs of it being resolved. President Trump is calling for unconditional surrender, but this is a very unlikely prospect.”
Go Jeong-sam, Hankyung.com reporter jsk@hankyung.com