Brent crude surged by 10% to approximately $80 per barrel in over-the-counter trading on Sunday, according to oil traders. Analysts anticipate that prices could escalate to $100 per barrel following U.S. and Israeli strikes on Iran, which have escalated tensions in the Middle East.
The global oil benchmark has been on an upward trajectory this year, reaching $73 per barrel on Friday, its highest level since July. Concerns over potential attacks have been a driving force behind this rally. Futures trading remains closed during the weekend.
Ajay Parmar, the director of energy and refining at ICIS, highlighted the significance of the closure of the Strait of Hormuz, stating that the recent military actions and the threat to the waterway have been supportive of oil prices. Numerous entities in the oil industry, including 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.
Expectations are high for oil prices to open significantly higher, possibly surpassing $100 per barrel, if the closure of the Strait persists, as mentioned by Ajay Parmar. Middle East leaders have cautioned the U.S. about the potential consequences of a conflict with Iran, warning that oil prices could exceed $100 per barrel. Analysts at Rabobank are slightly more reserved, foreseeing prices remaining above $90 per barrel in the short term.
The OPEC+ group of oil producers has agreed to a modest output increase of 206,000 barrels per day starting in April, representing less than 0.2% of global demand. Despite potential alternative routes to bypass the Strait of Hormuz, Rystad energy economist Jorge Leon estimates a significant loss of 8-10 million barrels per day in crude oil supply even with diversions through other pipelines.
Rystad predicts a price surge of approximately $20 to around $92 per barrel when trading resumes. The Iran crisis has led Asian governments and refiners to evaluate oil stockpiles and seek alternative shipping routes and supplies. Kpler analysts suggested that India may consider turning to Russian oil to compensate for potential losses in Middle East supply.