Crude oil prices surged sharply on Monday, climbing Rs 589 to hit a lifetime high of Rs 6,700 per barrel in futures trade amid escalating tensions in the Middle East. On the Multi Commodity Exchange (MCX), crude oil for April delivery traded Rs 594 higher, or 9.73 per cent up, at Rs 6,596 per barrel. The sharp rally followed news that Saudi Aramco had shut down its Ras Tanura Refinery as a precautionary measure after it was hit by a drone.
Middle East Conflict Disrupts Energy Supply Chain
Oil prices rose significantly after US and Israeli attacks on Iran, followed by retaliatory strikes against Israel and US military installations around the Gulf, disrupting the global energy supply chain.
Traders are betting that oil supply from Iran and other Middle Eastern producers could slow or come to a halt amid continued hostilities.
Attacks across the region, including on two vessels travelling through the Strait of Hormuz — the narrow entrance to the Persian Gulf — have restricted countries’ ability to export oil to global markets. Energy experts warn that prolonged attacks could result in even higher crude oil and gasoline prices.
Brent and WTI Prices Rally
West Texas Intermediate, the light, sweet crude produced in the United States, was trading at around USD 72 per barrel early Monday, up about 7.3 per cent from approximately USD 67 on Friday, according to CME Group data.
A barrel of Brent Crude, the international benchmark, was trading at USD 78.55 per barrel early Monday, according to FactSet, up 7.8 per cent from USD 72.87 on Friday, which had been a seven-month high at the time.
Strait of Hormuz: World’s Most Critical Oil Chokepoint
Roughly 15 million barrels of crude oil per day — about 20 per cent of the world’s total supply — pass through the Strait of Hormuz, making it the world’s most critical oil chokepoint, according to Rystad Energy.
Tankers travelling through the strait, bordered in the north by Iran, transport oil and gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the UAE and Iran.
Iran had temporarily shut down parts of the strait in mid-February for what it described as a military drill, which led oil prices to jump around 6 per cent in the following days.
Impact on Consumers
Higher global energy prices could lead to increased fuel costs at the pump and higher prices for groceries and other goods, at a time when many consumers are already grappling with elevated inflation.
