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NEW YORK — Oil prices surged when trading commenced on Sunday, driven by U.S. and Israeli military actions against Iran and subsequent retaliatory strikes targeting Israel and U.S. military bases around the Gulf region. These developments have significantly impacted the global energy supply chain.
Market traders anticipated a disruption in oil supplies from Iran and other Middle Eastern nations. The ongoing attacks throughout the region, particularly those affecting two vessels in the Strait of Hormuz, could severely limit the ability of countries to export oil globally. Energy experts warn that such disruptions are likely to push up the prices of crude oil and gasoline.
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As of Sunday night, West Texas Intermediate (WTI) crude oil, an American light and sweet grade, was trading at approximately $72 per barrel. This marks a significant increase of around 8% from its Friday price of about $67.
The Strait of Hormuz is a vital conduit for global energy, with nearly 15 million barrels of crude oil passing through daily. This represents about 20% of the world’s oil supply, according to Rystad Energy. The strait, flanked by Iran to the north, is a key passage for tankers transporting 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 said was a military drill. Further disruptions to that shipping channel could lead to lower supply and higher prices for oil.
Attacks throughout the region, including on two vessels traveling through the Strait of Hormuz, the narrow mouth of the Persian Gulf, could restrict countries’ ability to export oil to the rest of the world. That would likely result in higher prices for crude oil and gasoline, according to energy experts.
Against that backdrop, eight countries that are part of the OPEC+ oil cartel announced they would boost production of crude Sunday. The Organization of Petroleum Exporting Countries, in a meeting planned before the war began, said it would increase production by 206,000 barrels per day in April, which was more than analysts had been expecting. The countries boosting output include Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman.
“Roughly one-fifth of global oil supply passes through the Strait of Hormuz, a vital artery for world trade, meaning markets are more concerned with whether barrels can move than with spare capacity on paper,” said Jorge León, Rystad’s senior vice president and head of geopolitical analysis, in an email. “If flows through the Gulf are constrained, additional production will provide limited immediate relief, making access to export routes far more important than headline output targets.”
Iran exports roughly 1.6 million barrels of oil a day, mostly to China, which may need to look elsewhere for supply if Iran’s exports are disrupted, another factor that could increase energy prices.
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