By There is no stopping oil prices from climbing further as tensions intensify across the Middle East.
As Iran retaliated by carrying out strikes over energy facilities in Saudi Arabia, Qatar and the United Arab Emirates, experts believe oil prices are expected to continue rising, and breach the $120 per barrel mark reached earlier this month.
Prices could continue to rise and reach unprecedented levels of $150.
“Beyond the immediate risks to civilians and workers at these facilities, any such attacks would likely push oil prices up by at least another $10 and significantly disrupt supply, particularly across key producers in the Middle East,” Aditya Saraswat, senior vice president, at Rystad Energy, based in Dubai, said in an emailed commentary.
Brent surges to $119
Brent crude prices on the Intercontinental Exchange were last at $114.46 per barrel, up 6.7%.
Prices had hit a more than one-week high of $119.11 a barrel earlier in the session.
The ongoing military escalation between the US and Iran has resulted in the closure of the Strait of Hormuz, causing a severe predicament for Gulf countries.
Their oil inventories are nearing maximum capacity, creating significant challenges for local refiners.
Oil prices surged on Thursday after Iran escalated the war by attacking Middle East energy facilities following Israel’s strike on its South Pars gas field.
QatarEnergy reported “extensive damage” to its core LNG operations at Ras Laffan from Iranian missiles.
Additionally, Saudi Arabia intercepted four missiles toward Riyadh and a drone at a gas facility, while its SAMREF refinery in Yanbu was also attacked.
Kuwait Petroleum Corporation’s Mina al-Ahmadi refinery sustained a limited fire after a drone strike.
Iran issued evacuation warnings for Saudi, UAE, and Qatari oil facilities before retaliating for strikes on its own South Pars and Asaluyeh energy infrastructure.
The South Pars gas deposit, the world’s largest, is a natural gas field shared by Iran and US ally Qatar across the Gulf.
Late on Wednesday, US President Donald Trump confirmed that Israel was responsible for the attack on the South Pars gas field, stating that neither the United States nor Qatar was involved.
Oil to reach $150/barrel?
Should the statements from Iran’s semiofficial Tasnim news agency prove accurate, the global market would immediately lose at least 700,000 barrels per day of refined product capacity, according to Rystad Energy.
This simultaneous disruption, stemming from attacks on facilities in Saudi Arabia, the UAE, and Qatar, would impact the supply of diesel, jet fuel, and naphtha across all three nations.
The price of oil, which is currently at $114 per barrel, would likely exceed $120, and further price increases are anticipated, depending on the extent of the resulting damage, Rystad Energy’s Saraswat said.
“Saudi Arabia has been hit by strikes, but loadings remain unaffected, a critical factor for oil markets as any disruption to key infrastructure such as the port of Yanbu could remove 5 to 6 million barrels per day from the market and potentially push oil prices to $150 or higher,” Rystad Energy said.
A successful strike poses a significant threat to global LNG supply, with Qatar being the most acutely exposed as it handles approximately one-fifth of all seaborne LNG trade.
Such a disruption would not only impact condensate refining but also jeopardise the continuous operation of LNG trains that supply Europe, Japan, South Korea, and China under existing long-term agreements.
Should this happen, spot LNG prices, which are already high, could surge to levels comparable to those witnessed during the 2022 energy crisis.
A key difference this time is that Europe has considerably less gas storage capacity to absorb such a severe market shock.
Conclusions from previous oil price shock
Historically, geopolitical events have caused sharp drops in oil supply, leading to significant oil price increases.
Elevated prices subsequently stimulate greater supply while simultaneously curbing demand.
Shale oil production will likely increase more rapidly than production from an undeveloped offshore oil field.
However, this increase occurs gradually, over a prolonged period, Commerzbank AG’s commodity analyst Carsten Fritsch said.
Global oil demand is currently rising very little, and has been decreasing in industrialised countries for years.
Consequently, the potential for demand-side savings is probably smaller today than it was five decades ago, according to Fritsch.
Furthermore, in contrast to the 1970s, industrialised nations now possess emergency reserves, a strategy adopted following the lessons learned from the supply shocks of that earlier period.
“The state-controlled emergency reserves of OECD countries would cover the loss of oil supplies from the Middle East for a good three months if all alternative supply routes were exhausted,” Fritsch noted.
With China possessing an equal amount of reserves and an additional 2 billion barrels currently aboard tankers at sea, an immediate threat of a supply shortage is non-existent.
“Nevertheless, should oil supplies through the Strait of Hormuz be disrupted for a prolonged period, nervousness on the oil market would continue to rise, and with it, oil prices,” Fritsch added.
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