Brent crude surged by 10% to approximately $80 per barrel in off-hours trading on Sunday, according to oil traders. Analysts are forecasting a possible increase in prices to around $100 per barrel following military actions by the U.S. and Israel against Iran, which have heightened tensions in the Middle East.
The global oil benchmark has shown a strong rally this year, touching $73 per barrel on Friday, its highest level since July, driven by concerns over potential attacks that materialized a day later. Weekend futures trading remained closed.
Ajay Parmar, the director of energy and refining at ICIS, emphasized that the closure of the Strait of Hormuz is a critical factor impacting oil prices. Many tanker operators, major oil companies, and trading entities have halted shipments of crude oil, fuel, and liquefied natural gas through the vital waterway following warnings from Tehran. The Strait of Hormuz facilitates the transportation of over 20% of the world’s oil.
Parmar noted that prices are likely to open significantly higher, approaching $100 per barrel, and could surpass that level if the blockade of the Strait persists. Middle Eastern leaders have cautioned the U.S. that a conflict with Iran could propel oil prices above $100 per barrel, according to RBC analyst Helima Croft. Rabobank analysts are slightly more conservative, anticipating prices to remain above $90 per barrel in the short term.
Over the weekend, the OPEC+ alliance agreed to increase output by 206,000 barrels per day starting in April, a minor adjustment amounting to less than 0.2% of global demand. Despite potential alternative routes to bypass the Strait of Hormuz, the closure of the strait could result in a loss of 8 to 10 million barrels per day of crude oil supply, even with redirected flows through pipelines in Saudi Arabia and Abu Dhabi, as stated by Rystad energy economist Jorge Leon.
Rystad projects a price hike of approximately $20, reaching around $92 per barrel when markets resume trading. The Iran crisis has prompted Asian governments and refiners to evaluate oil inventories and explore alternative shipping routes and supply sources. Kpler analysts mentioned during a webinar that India may consider turning to Russian oil to offset potential disruptions in Middle East supply chains.
