Brent crude surged by 10% to approximately $80 per barrel on Sunday, according to oil traders. Analysts are forecasting a possible increase 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 the rise this year, hitting $73 per barrel on Friday, the highest since July. Concerns over potential attacks have been a driving force behind the recent rally. Futures trading remains closed during the weekend.
Ajay Parmar, the director of energy and refining at ICIS, highlighted that the military attacks have bolstered oil prices, but the main concern is the closure of the crucial Strait of Hormuz. Trade sources revealed that most tanker owners, oil majors, and trading houses have halted shipments of crude oil, fuel, and liquefied natural gas through the strait, following warnings from Tehran. Approximately 20% of global oil passes through the Strait of Hormuz.
Parmar anticipates that prices could open significantly higher, possibly exceeding $100 per barrel if the closure of the strait persists. Middle Eastern leaders have cautioned that a conflict with Iran could push oil prices above $100 per barrel, according to RBC analyst Helima Croft. Rabobank analysts are slightly more conservative, foreseeing prices remaining above $90 per barrel in the short term.
The OPEC+ group of oil producers agreed on Sunday to increase output by 206,000 barrels per day starting in April, a relatively small rise representing less than 0.2% of global demand. Despite potential alternatives to bypass the Strait of Hormuz, the closure is expected to result in a loss of 8 to 10 million barrels per day of crude oil supply, even after redirecting some flows through pipelines in Saudi Arabia and Abu Dhabi, as noted by Rystad energy economist Jorge Leon. Rystad projects that prices could climb by $20 to around $92 per barrel at the opening of trading.
In response to the Iran crisis, Asian governments and refiners are evaluating oil stockpiles, alternative shipping routes, and supplies. Kpler analysts suggested in a webinar that India might pivot to Russian oil to offset potential disruptions in Middle East supply.
