Oil jumps 10% on Iran conflict and could spike to $100 a barrel

DCM Editorial Summary: This story has been independently rewritten and summarised for DCM readers to highlight key developments relevant to the region. Original reporting by Irish Times, click this post to read the original article.

Brent crude jumped 10 per cent to about $80 (€68) a barrel ​over the counter on Sunday, oil traders said, while analysts predicted that prices could climb as high as $100 after United States and Israeli strikes on Iran plunged the Middle East into fresh conflict.

The global oil benchmark has rallied this year and reached $73 a ​barrel on Friday for its highest since July, buoyed by growing concern over the potential attacks that arrived a day later. Futures trading ⁠is closed over the weekend.

“While the military attacks are themselves supportive for oil prices, the key ‌factor ‌here ​is the closing of the Strait of Hormuz,” said Ajay Parmar, director of energy and refining at Independent Commodity Intelligence Services, referring to the stretch of water that links the Persian Gulf with the open seas.

Trade sources said most tanker owners, oil majors and trading houses had suspended ⁠crude oil, fuel and liquefied natural gas ​shipments through the strait after Tehran warned ships against moving through the waterway. More than a fifth of global oil is moved through the ‌strait.

“We expect prices to open [after ​the weekend] much closer to $100 a barrel and perhaps exceed that level if we see ⁠a prolonged outage of the strait,” Parmar said.

[ Iran’s supreme leader Ali Khamenei confirmed dead following US-Israeli attacks ]

Middle ⁠East leaders have warned ​Washington that a war on Iran could lead to oil prices jumping to more than $100 a barrel, RBC analyst Helima Croft said. Rabobank analysts slightly less bullish, seeing prices holding above $90 a barrel in the near term.

The Opec+ group of oil producers, which comprises Opec and other oil-producing nations, agreed on Sunday to raise output by 206,000 barrels per day (bpd) from April, a modest increase representing less than 0.2 per cent of global demand.

While some alternate infrastructure could be used to bypass the Strait of Hormuz, the net impact from ‌its closure would be ⁠a loss of eight 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, Rystad energy economist Jorge Leon said.

Rystad ‌expects prices to rise by $20 to about $92 a barrel when trade opens.

The Iran crisis also prompted Asian governments and refiners to assess ​oil stockpiles and alternative shipping routes and supplies.

Kpler analysts said in ​a webinar on Sunday that India might turn to oil from Russia to make up for potential Middle East supply loss. – Reuters