Oil prices rise sharply in market trading after attacks in Middle East disrupt global energy supply
By CATHY BUSSEWITZ
NEW YORK (AP) — Oil prices rose sharply as trading began Sunday, as U.S. and Israeli attacks on Iran and retaliation against Israel and U.S. military installations around the Gulf caused disruptions in the global energy supply chain.
Traders were betting that oil supplies from Iran and elsewhere in the Middle East would slow or even stop. Attacks across the region, including on two ships passing through the Strait of Hormuz, the narrow mouth of the Persian Gulf, have limited countries’ ability to export oil to the rest of the world. Prolonged attacks would likely lead to higher crude oil and gasoline prices, energy experts say.
West Texas Intermediate, the light, sweet crude oil produced in the United States, was selling at around $72 a barrel late Sunday, up about 8% from its trading price of around $67 on Friday, according to CME Group data.
Brent crude, the international standard, was trading at around $79 a barrel late Sunday, according to FactSet, up about 8% from its trading price of $72.87 Friday, which was then a seven-month high.
Rising global energy prices could lead consumers to pay more for gasoline at the pump and fork out more for groceries and other goods, at a time when many are already feeling the effects of high inflation.
About 15 million barrels of crude oil per day – or about 20% of the world’s oil – are shipped through the Strait of Hormuz, making it the world’s most critical oil chokepoint, according to Rystad Energy. Tankers crossing the strait, bordered to the north by Iran, carry oil and gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the United Arab Emirates and Iran.
Iran had temporarily closed parts of the strait in mid-February for what it said was a military exercise, which sent oil prices soaring about 6% in the days that followed.
In this context, eight countries part of the OPEC+ oil cartel announced on Sunday that they would increase their crude production. The Organization of the Petroleum Exporting Countries, at a meeting scheduled before the war began, said it would increase production by 206,000 barrels per day in April, more than analysts expected. Countries that have increased production include Saudi Arabia, Russia, Iraq, United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman.
“About a fifth of the world’s oil supply passes through the Strait of Hormuz, a vital artery for global trade, meaning markets are more concerned about barrel-carrying capacity than spare capacity on paper,” Jorge León, Rystad’s senior vice president and head of geopolitical analysis, said in an email. “If flows across the Gulf are limited, additional production will provide limited immediate relief, making access to export routes far more important than overall production targets. »
Iran exports about 1.6 million barrels of oil per day, mainly to China, which may have to look elsewhere for supplies if Iranian exports are disrupted, another factor that could increase energy prices.
