Oil Jumps 10% on Iran Conflict and Could Spike to $100 a Barrel, Analysts Say

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Oil prices.

Brent Crude surged by 10 per cent to around $80 per barrel in over-the-counter trading on Sunday, oil traders said, as analysts warned that prices could climb as high as $100 following US and Israeli strikes on Iran that have pushed the Middle East into a new conflict.

The global benchmark has been rallying this year and reached $73 per barrel on Friday, its highest level since July, amid growing concerns over the possibility of attacks, which materialised a day later. Official futures trading remains closed over the weekend.

"While the military attacks are themselves supportive for oil prices, the key factor here is the closing of the Strait of Hormuz," Reuters quoted Ajay Parmar, director of energy and refining at ICIS, as saying.

Several tanker owners, major oil companies and trading houses have suspended crude oil, fuel and liquefied natural gas (LNG) shipments through the Strait of Hormuz after recent US and Israeli strikes on Iran and warnings from Tehran that vessels should not transit the waterway. These suspensions come amid heightened security risks and advisories urging ships to avoid the region. Some major shipping firms have directed vessels to remain anchored or seek shelter instead of passing through the strait.

About 20 percent of global oil and large volumes of LNG normally move through the Strait of Hormuz, making these pauses in shipping significant for global energy supply and markets.

"We expect prices to open (after the weekend) much closer to $100 a barrel and perhaps exceed that level if we see a prolonged outage of the Strait," Parmar said.

Middle East leaders have warned Washington that a war on Iran could lead to oil prices jumping to more than $100 a barrel, according to RBC analyst Helima Croft. Rabobank analysts slightly less bullish, seeing prices holding above $90 a barrel in the near term.

The OPEC+ group of oil producers agreed on Sunday to raise output by 206,000 barrels per day (bpd) from April, a modest increase representing less than 0.2% of global demand.

While some alternate infrastructure could be used to bypass the Strait of Hormuz, the net impact from its closure would be a loss of 8 million to 10 million bpd of crude oil supply even after diverting some flows through Saudi Arabia's East-West pipeline and Abu Dhabi's pipeline, according to Rystad energy economist Jorge Leon.

Rystad expects prices to rise by $20 to about $92 a barrel when trade opens.

The attacks by the U.S. and Israel on Iran could disrupt global oil and gas output.

The Iran crisis also prompted Asian governments and refiners to assess oil stockpiles and alternative shipping routes and supplies. Kpler analysts said in a webinar on Sunday that India might turn to Russian oil to make up for potential Middle East supply loss.

Source: Reuters



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