Oil prices to swing next week after US, Israel strike on Iran – National

Oil markets, currently closed for the weekend, will see price volatility next week as the impact of US and Israeli strikes against Iran on oil supplies from the Middle East remains unclear.

Scenarios behind the recent conflict with Iran foreshadowed rapid price rises that would fade if attacks on oil shipments and infrastructure such as Iranian pipelines and its terminal on Kharg Island were not affected. However, there is a large price spike and long-term impact if oil infrastructure or supplies are disrupted, such as disrupting tanker traffic through the Strait of Hormuz.

Oil prices have already risen due to war fears. International benchmark Brent crude oil ended at a seven-month high of US$72.87 on Friday.

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Iran exports about 1.6 million barrels of oil a day, most of which goes to China, where privately owned refineries are less concerned about US sanctions that prevent Iran from selling its oil elsewhere. If that supply is disrupted, Chinese consumers will look elsewhere for oil on the global market, potentially driving up prices.

Another question surrounds the Strait of Hormuz, through which 20 percent of global oil supplies pass every day. Middle Eastern exporters such as Saudi Arabia, Iraq and the United Arab Emirates send most of their exports through the strait. However, analysts say Iran has no incentive to close the strait because it would cut its own exports and hurt its single largest customer, China.

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Rystad Energy said in a pre-war scenario that limited strikes on Iran’s nuclear program and the Revolutionary Guard could push prices up US$5-US$10 based on fear alone, avoiding regime change or outright war.

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A wider war involving Iranian disruption of tanker traffic could see US gas prices “well” past US$90 per barrel and US$3 per gallon, according to another pre-war scenario by Clayton Siegel at the Center for Strategic and International Studies. US gas prices averaged US$2.98 per gallon last week, according to US motoring club AAA.