Fishermen work in front of oil tankers south of the Strait of Hormuz on January 19, 2012, offshore the town of Ras Al Khaimah, United Arab Emirates.
Kamran Jebraeli/AP
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Kamran Jebraeli/AP
NEW YORK – Oil prices rose sharply in early trading on Sunday as US and Israeli attacks on Iran and retaliatory strikes against Israel and US military installations around the Gulf sent disruptions through the global energy supply chain.
Traders bet that oil supplies from Iran and elsewhere in the Middle East could slow or be cut off. Attacks across the region, including on two ships traveling through the Strait of Hormuz, the narrow mouth of the Persian Gulf, have restricted the countries’ ability to export oil to the rest of the world. A prolonged strike could lead to higher prices for crude oil and gasoline, according to energy experts.
West Texas Intermediate, the lightest, sweetest crude produced in the United States, was selling for around $72 a barrel on Sunday night, up 8% from its trading price of around $67 on Friday, according to CME Group data.
A barrel of Brent crude oil, the international benchmark, was trading at around $79 per barrel on Sunday night, up nearly 8% from Friday’s trading price of $72.87, according to FactSet.
Roughly 15 million barrels of crude oil per day — about 20% of the world’s oil — are shipped through the Strait of Hormuz, which is the world’s most critical oil chokepoint, according to Ristad Energy. Tankers traveling through the strait bordered by Iran in the north carry oil and gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, UAE and Iran.
Iran temporarily closed parts of the strait in mid-February for what it said was a military drill. Further disruptions to that shipping channel could lead to less supply and higher prices for oil.
Attacks across the region, including on two ships traveling through the Strait of Hormuz, the narrow mouth of the Persian Gulf, could restrict countries’ ability to export oil to the rest of the world. This could lead to higher prices for crude oil and gasoline, according to energy experts.
Against that background, the eight countries that are part of the OPEC+ oil cartel announced that they will increase crude production on Sunday. The Organization of the Petroleum Exporting Countries, at a meeting planned before the outbreak of war, said it would increase output by 206,000 barrels a day in April, more than analysts had expected. Countries increasing production include Saudi Arabia, Russia, Iraq, United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman.
Roughly one-fifth of global oil supplies pass through the Strait of Hormuz, a major artery for world trade, meaning markets are more concerned about whether barrels can move than spare capacity on paper,” said George Lyon, Rystad’s senior vice president and head of geopolitical analysis, in an email. “If flows through the Gulf are blocked, excess production will provide limited immediate relief, with access to export routes more important than core product targets.”
Iran exports roughly 1.6 million barrels of oil per day, mostly to China, which may have to look elsewhere for supplies if Iran’s exports are disrupted, another factor driving up energy prices.
