Crude Oil Skyrockets As Intensifying Gulf War Triggers Production Concerns

(RTTNews) – Crude oil has catapulted on Friday after Qatar warned of a production halt in the gulf in the coming days as the ongoing U.S.-Israeli war against Iran has heavily disrupted the energy supply route through the Strait of Hormuz.

WTI Crude Oil for April delivery was last seen trading up by $9.88 (or 12.20%) at $90.89 per barrel.

The war that erupted in the Middle East after the U.S. and Israel launched a furious military offensive against Iran on February 28 has entered day number seven today.

The U.S.-Israel attacks, which killed Iran’s Supreme Leader Ayatollah Ali Khamenei, have so far claimed more than 1,300 lives in Iran.

U.S. President Donald Trump has refused any other settlement with Iran other than its unconditional surrender. Iran’s Foreign Minister Abbas Araghchi announced that they are not seeking negotiations.

Refusing to give up, Iran has expanded its retaliation against all U.S. bases installed in the Arabian neighborhood.

Energy transit through the Strait of Hormuz has been disrupted, with the number of ships passing through the channel decreasing for the past week, (from an average of 138 ships per day to merely two yesterday) fearing attacks.

The Strait of Hormuz, the narrow shipping lane running between the Persian Gulf and the Gulf of Oman is the only passage from the Persian Gulf to the open ocean and is a strategic chokepoint for oil transit and an artery for energy movement in the gulf.

Around 20% of global oil and gas inventories pass through this seaway to the rest of the world. Top global oil importers, including China (5.4 million barrels per day), India (2.1 million bpd), South Korea (1.7 million bpd), and Japan (1.6 million bpd), stand to suffer more.

While Iranian General Sardar Ebrahim Jabbari declared that Iran will not allow oil to leave the region, Iran’s Deputy Foreign Minister Saeed Khatibzadeh denied it, stating there is “no immediate plan” to shut the oil route.

U.S. Energy Secretary Christopher Wright stated in an interview with Fox News that the U.S. Navy is readying to escort ships through the Strait of Hormuz.

The U.S. is also reportedly considering large-scale release of oil from the Strategic Petroleum Reserve in coordination with IEA partners.

Faced with supply and transit challenges, Qatar’s Energy Minister Saad-al-Kaabi told the Financial Times that a prolonged war could force energy exporters in the gulf to halt production in the coming days. Kaabi also warned that oil prices may shoot up to $150 per barrel.

Reportedly, Kuwait had already shut down oil production at some of its oil fields due to storage concerns.

Blocking the strait is expected to inflate global goods and services costs too. The war has also affected global logistic chains and food supplies to the gulf countries.

With air freight to the Middle East declining more than 20% since the war began, CEO of logistics giant Kuehne + Nagel Stefan Paul warned that Dubai may have just around 10 days of fresh food supply.

With no end to the furious war in sight, experts feel that oil prices could continue to climb in the coming days.

In a virtual meeting last Sunday, the OPEC member-nations agreed to increase oil production by 206,000 barrels per day in April.

In the U.S., according to a Baker Hughes Company’s report, crude oil rigs have increased to 411 on March 6 from 407 in the previous week and total rigs have increased to 551 from 550 in the previous week.

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