After the joint attack of the United States and Israel on Iran, the war spread across the Middle East, the price of fuel oil increased in the world market. The price of Brent crude oil rose by 10 percent in the international market on Sunday and reached about 80 dollars per barrel. Those concerned fear that if this conflict lasts long, the price of oil may quickly exceed $100.
According to market analysts, the main reason behind the rise in oil prices is the virtual closure of the strategically important Strait of Hormuz. More than 20 percent of the world’s total fuel oil is transported through this narrow waterway. Most major oil companies, tanker owners and trading houses have suspended crude oil and LNG shipments through the route after Tehran issued a warning to shipping.
Ajay Parmar, director of the energy research institute ICIS, said that while military strikes have contributed to the increase in oil prices, the real impact is due to the closure of the Strait of Hormuz. Oil prices could move closer to or above $100 a barrel when regular trading resumes on Monday.
George Lyon, an economist at Rystad Energy, said there could be a shortfall of 8 million to 10 million barrels of oil per day despite efforts to keep some supplies running using pipelines in Saudi Arabia and Abu Dhabi. According to him, the price may increase by at least 20 dollars to 92 dollars per barrel as soon as the market opens.
Meanwhile, OPEC Plus, an alliance of oil producing countries, has announced an additional 26,000 barrels of oil production per day from next April to deal with the emerging situation. However, as this amount is only 0.2 percent of global demand, the possibility of its impact on the market is weak.
Meanwhile, due to the fear of energy crisis, Asian countries including India and China have started looking for alternative sources. Research firm Kepler said India could once again turn to Russian oil on a large scale if supplies from the Middle East are not assured.
