(RTTNews) – Crude oil rose on Friday after Qatar warned it would halt output in the Gulf in coming days as the ongoing US-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 at $90.89 per barrel, up $9.88 (or 12.20%).
The war that broke out in the Middle East after the US and Israel launched a fierce military attack against Iran on February 28 has entered its seventh day today.
The US-Israeli strikes, which killed Iran’s supreme leader Ayatollah Ali Khamenei, have so far killed more than 1,300 people in Iran.
US President Donald Trump has refused any agreement with Iran other than unconditional surrender. Iran’s Foreign Minister Abbas Araghchi announced that he was not seeking negotiations.
Refusing to concede defeat, Iran has expanded its retaliation against all US bases established in the Arab neighborhood.
Energy transit through the Strait of Hormuz has been disrupted, with the number of ships passing through the channel declining over the past week (from an average of 138 ships per day to only two yesterday) due to fears of attacks.
The Strait of Hormuz, the narrow shipping lane running between the Persian Gulf and the Gulf of Oman, is the only route 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.
About 20% of global oil and gas reserves reach the rest of the world through this sea route. 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) will suffer greater losses.
While Iranian General Sardar Ibrahim Jabbari declared that Iran would not allow oil to leave the region, Iran’s Deputy Foreign Minister Saeed Khatibzadeh denied this, saying there were “no immediate plans” to close the oil route.
US Energy Secretary Christopher Wright said in an interview with Fox News that the US Navy is prepared to escort ships through the Strait of Hormuz.
The US is also reportedly considering a large-scale release of oil from the Strategic Petroleum Reserve in coordination with IEA partners.
Facing 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. Kabi also warned that oil prices could reach $150 per barrel.
Reportedly, Kuwait had already halted oil production at some of its oil fields due to storage concerns.
Blocking the strait is also expected to increase the cost of global goods and services. The war has also affected global logistics chains and food supplies to the Gulf countries.
With air freight to the Middle East falling by more than 20% since the war began, CEO of logistics giant Kuehne + Nagel Stephen Paul warned that Dubai could have about 10 days’ worth of fresh food supply.
With no end in sight to the fierce war, experts believe oil prices may continue to climb in the coming days.
In a virtual meeting last Sunday, OPEC member countries agreed to increase oil production by 206,000 barrels per day in April.
U.S. crude oil rigs rose to 411 on March 6 from 407 the week before, and total rigs rose to 551 from 550 the week before, Baker Hughes Co. reported.
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