Oil jumps 10% due to Iran conflict and could reach US$100 per barrel, analysts say
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Brent crude jumped 10 percent to nearly US$80 a barrel on Sunday, oil traders said, while analysts forecast prices could reach US$100 after US and Israeli attacks on Iran plunged the Middle East into a new war.
The global oil benchmark has surged this year and hit US$73 a barrel on Friday, its highest since July, boosted by growing concerns over possible attacks a day later. Futures trading remains closed on weekends.
“While the military strikes themselves are supportive of oil prices, the key factor here is the closure of the Strait of Hormuz,” said Ajay Parmar, director of energy and refining at ICIS.
Most tanker owners, oil companies and trading houses have suspended crude oil, fuel and liquefied natural gas shipments through the Strait of Hormuz after Tehran warned ships against sailing through the waterway, trade sources said. More than 20 percent of global oil is transported through the Strait of Hormuz.
“We expect prices to open (after the weekend) near US$100 a barrel and probably cross that level if we see a prolonged blockage in the Straits,” Parmar said.
Middle East leaders have warned Washington that a war on Iran could push oil prices above US$100 a barrel, said RBC analyst Helima Croft. Rabobank analysts are slightly less optimistic, expecting prices to remain above $90 a barrel in the near term.
The OPEC+ group of oil producers agreed on Sunday to increase output by 206,000 barrels per day (bpd) from April, a modest increase representing less than 0.2 percent of global demand.
While some alternative infrastructure could be used to bypass the Strait of Hormuz, the net effect of 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, said George Lyon, economist at Rystad Energy.
Rystad expects prices to rise by $20 to around US$92 a barrel when trading opens.
The Iran crisis also prompted Asian governments and refiners to assess oil reserves and alternative shipping routes and supplies. India may turn to Russian oil to offset potential Middle East supply losses, Kpler analysts said in a webinar on Sunday.
