Brent crude surged by 10% to approximately $80 per barrel on Sunday, as reported by oil traders. Analysts are now foreseeing a potential rise in prices to around $100 per barrel following the U.S. and Israeli attacks on Iran, which have escalated tensions in the Middle East.
The global oil benchmark has displayed a strong rally this year, hitting $73 per barrel on Friday, its highest level since July. The concerns over possible attacks have further fueled this surge. Futures trading remains closed during weekends.
Ajay Parmar, the director of energy and refining at ICIS, emphasized the significance of the recent military actions in supporting oil prices. Additionally, the closure of the Strait of Hormuz has led to the suspension of crude oil, fuel, and liquefied natural gas shipments by most tanker owners, oil majors, and trading houses. This move follows Tehran’s warning against vessels passing through the strait, through which over 20% of global oil is transported.
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 the U.S. that a conflict with Iran could push oil prices above $100 per barrel, with RBC analyst Helima Croft echoing similar sentiments. Rabobank analysts are slightly more conservative, projecting prices to remain above $90 per barrel in the immediate term.
In a recent development, the OPEC+ group has agreed to increase output by 206,000 barrels per day starting in April, a modest rise that accounts for less than 0.2% of global demand. Despite potential alternative infrastructure options to circumvent the Strait of Hormuz, Rystad energy economist Jorge Leon estimates a substantial loss of 8 to 10 million barrels per day in crude oil supply. Rystad forecasts a price surge of $20 to reach approximately $92 per barrel when trading resumes.
Amid the Iran crisis, Asian governments and refiners are evaluating their oil stockpiles and exploring alternative shipping routes and suppliers. Kpler analysts suggested during a webinar that India may consider turning to Russian oil to offset potential supply disruptions from the Middle East.