Crude oil prices surpass US$100 a barrel as the Iran war impedes production and shipping

March 9 ------ Oil prices have eclipsed US$100 per barrel for the first time in more than three and a half years as the Iran war hinders production and shipping in the Middle East. West Texas Intermediate (WTI) jumped 20 per cent to US$109.17 a barrel, a level not seen since Russia launched its invasion of Ukraine in February 2022, while the international Brent benchmark contract was up 19 per cent at US$110.35. Both could rise or fall as market trading continues.

US President Donald Trump on Sunday (Mar 8) dismissed the war-related spike in oil prices as a "small price to pay" for removing the threat of Iran's nuclear program. "Short term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for USA, and World, Safety and Peace. ONLY FOOLS WOULD THINK DIFFERENTLY!" he wrote on his Truth Social platform.

The increases followed US crude prices jumping by 36 per cent and Brent crude prices rising 28 per cent last week. Oil prices have surged as the war, now in its second week, ensnared countries and places that are critical to the production and movement of oil and gas from the Persian Gulf. Roughly 15 million barrels of crude oil - about 20 per cent of the world’s oil - typically are shipped every day through the Strait of Hormuz, according to independent research firm Rystad Energy.

The threat of Iranian missile and drone attacks has all but stopped tankers from travelling through the strait, which is bordered in the north by Iran, carrying oil and gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the United Arab Emirates and Iran.

Iraq, Kuwait and the UAE have cut their oil production as storage tanks fill due to the reduced ability to export crude. Iran, Israel and the United States have also attacked oil and gas facilities since the war started, exacerbating supply concerns. The last time US crude futures traded above US$100 per barrel was Jun 30, 2022, when the price reached US$105.76. For Brent, it was Jul 29, 2022, when the price hit US$104 per barrel. The global surge in oil prices since Israel and the US attacked Iran has rattled financial markets, sparking worries that higher energy costs will fuel inflation and lead to less spending by US consumers, the main engine of the economy.

In the US, a gallon of regular gasoline rose to US$3.45 on Sunday, about 47 cents more than a week earlier, according to AAA motor club. Diesel was selling for about US$4.60 a gallon, a weekly increase of about 83 cents. The price of natural gas has also climbed, though not as much as oil. It rose about 11 per cent last week and ended Friday at US$3.19 per 1,000 cubic feet. If oil prices stay above US$100 per barrel, some analysts and investors say it could be too much for the global economy to withstand. Over the weekend, Israel’s military struck oil depots in Tehran and four oil storage tankers and a petroleum transfer terminal.

Mohammad Bagher Qalibaf, the speaker of Iran’s parliament, said the war’s impact on the oil industry would spiral, warning it soon could become harder to produce and sell oil. Iran exports roughly 1.6 million barrels of oil a day, mostly to China, which may need to look elsewhere for supply if Iran’s exports are disrupted, another factor that could increase energy prices.

Source: channelnewsasia.com