Oil prices surge more than 20% on prolonged shipping disruptions
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The news: Oil prices surged more than 20% in morning trade, hitting the highest level since July 2022 as the escalating US-Israel war with Iran led major oil producers in the Middle East to shut down supplies on fears of prolonged disruption to the Strait of Hormuz chokepoint.
Iraq and Kuwait have started cutting oil output, adding to last week’s liquefied natural gas reduction from Qatar.
Brent crude futures climbed 23.93% to USD114 per barrel and crude oil surged 26.30% to USD114 as of 2:23pm AEDT.
The context: Analysts from Reuters have predicted the United Arab Emirates and Saudi Arabia will follow suit in cutting off supplies as soon as they run out of oil storage.
The war, according to analysts, could leave global consumers and businesses facing months of higher fuel costs even if the Middle East conflict has been resolved, as suppliers are faced with the aftermath of damaged facilities, disrupted logistics and heightened shipping risks.
Iraqi oil production from its main southern oilfields has fallen by 70% to 1.3 million barrels per day as the country is unable to export oil via the Strait of Hormuz.
What they said: “The next flag will be whether it eventually gets to a point where they have to start shutting in oil wells, which not only impacts output even further, it delays a response once the conflict eases as well. That would potentially sustain those prices for much longer,” ANZ senior commodity strategist Daniel Hynes said.
The source: Reuters
