Brent crude surged by 10% to approximately $80 per barrel in over-the-counter trading on Sunday, according to oil traders. Analysts are foreseeing a potential rise in prices up to $100 per barrel following U.S. and Israeli strikes on Iran, which have heightened tensions in the Middle East.
The global oil benchmark has been on an upward trend this year, hitting $73 per barrel on Friday, the highest level since July. Concerns over possible attacks intensified, leading to the sharp spike after the events unfolded. Futures trading was not available over the weekend.
Ajay Parmar, the director of energy and refining at ICIS, emphasized that beyond the military actions impacting oil prices, the critical factor is the potential closure of the vital Strait of Hormuz. Trade sources revealed that many tanker owners, oil majors, and trading houses have halted shipments of crude oil, fuel, and liquefied natural gas through the Strait of Hormuz in response to Tehran’s warnings. Over 20% of global oil transportation passes through this strategic waterway.
Parmar predicted that prices are likely to open significantly higher, potentially nearing $100 per barrel, particularly if the closure of the Strait persists. Middle Eastern leaders have cautioned the U.S. that a conflict with Iran could trigger oil prices to surpass $100 per barrel. RBC analyst Helima Croft echoed these sentiments, while Rabobank analysts foresee prices remaining above $90 per barrel in the short term.
The OPEC+ alliance agreed on Sunday to increase output by 206,000 barrels per day starting in April, a marginal rise that represents less than 0.2% of global demand. Despite the possibility of utilizing alternative routes to bypass the Strait of Hormuz, the closure could result in a significant loss of 8 to 10 million barrels per day of crude oil supply, even with redirections through pipelines in Saudi Arabia and Abu Dhabi, according to Rystad Energy economist Jorge Leon. Rystad Energy anticipates a price surge of around $20, reaching approximately $92 per barrel when markets reopen.
The crisis in Iran has prompted Asian governments and refiners to review oil stockpiles and explore alternative shipping routes and suppliers. Kpler analysts suggested during a webinar that India might consider turning to Russian oil to compensate for potential disruptions in Middle East supply.