Crude oil jumps 20% in early Asian trade as Iran war escalates

Crude oil prices extended gains from the previous week and surged around 20 percent in early Asian trade on Monday to touch the highest level since July 2022 due to massive supply disruptions caused by the blockage of the Strait of Hormuz amid the escalating Israel-US war with Iran. While Israel-US joint operations target infrastructure facilities, military installations and other prominent structures in Iran, Tehran has attacked energy facilities and US defence installations across the Middle East.

Brent crude futures for near-month delivery on the InterContinental Exchange (ICE) climbed 20 percent, or US$ 18.35 a barrel, to US$ 111.04 a barrel in early Asian trade. West Texas Intermediate (WTI) Cushing futures on the New York Mercantile Exchange (Nymex) followed suit and gained 22 percent, or US$ 20.34 a barrel, to US$ 111.24 a barrel in opening trade on Monday. Both benchmarks gained a phenomenal 27 percent and 36 percent, respectively, last week. Monday’s jump marked the largest one-day increase in history.

Experts believe that the upsurge in crude oil prices will continue and may breach the US$ 127.98 a barrel level for Brent futures reached on March 8, 2022, following Russia’s invasion of Ukraine on February 24, 2022. On the current occasion, the closure of the Strait of Hormuz the key supply line transporting approximately 20 percent of global oil supply is supporting crude oil price gains. With Iraq and Kuwait starting to cut production, the current oil price rally appears to have significant upward momentum. After Iraq was forced to shut its West Qurna-2 and Rumaila oil fields this week, Kuwait’s state oil firm, Kuwait Petroleum Corporation (KPC), began cutting production at some of its fields as storage tanks filled rapidly in the country following the shutdown of its 464,000-bpd Mina Abdullah refinery.
DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com