The price of a barrel of Brent has exceeded $90 and reached a high point
Futures for Brent crude oil with delivery in May on London’s ICE exchange rose 5.64% on March 6, rising to $90.23 per barrel, RBC notes.
Since the beginning of the week, prices have risen by 23.8% due to the aggravation of the situation in the Middle East. In response to the Israeli and US operation, Iran launched a wave of missile and drone attacks targeting US bases in the Persian Gulf. Oil and gas supplies from the Persian Gulf were disrupted. The conflict spread to key oil-producing regions of the Middle East, blocking production processes and forcing the suspension of refineries.
As early as March 1, Iran announced a halt to trade through the Strait of Hormuz until further notice. A few days later, the country said it had not blocked navigation through the Strait of Hormuz. However, on the night of March 4, Iran announced a ban on movement through the Strait of Hormuz, including oil tankers, commercial and fishing vessels. Vessel traffic in this section has been almost completely halted.
About 20% of the world’s oil and up to 30% of the world’s supplies of liquefied natural gas pass through the Strait of Hormuz, and it is called the most important energy artery of the planet.
What will happen to oil prices next
According to RBC experts, first of all, the duration of the closure of the Strait of Hormuz for shipping, as well as the shutdown of Qatar Energy’s LNG plants due to attacks, will be important for price dynamics. If the supply disruptions and risks to infrastructure prove to be long-lasting, oil could theoretically consolidate above $100 per barrel.
However, in the event of a quick de-escalation, the geopolitical risk premium will quickly fade from prices – the market will then look again to supply growth and OPEC+ decisions, which could take Brent back to lower levels.
Note that Qatar’s Energy Minister Saad Sherida al-Qaabi warned: war in the Middle East could undermine the global economy. According to the minister’s forecasts, all energy exporters from the Gulf countries will stop production within a few days, which will lead to an increase in oil prices to $150 per barrel. He also allowed natural gas prices to rise to 117 euros per 1 MWh ($1420 per 1,000 cubic meters), nearly four times the level before the conflict in the Middle East.
