Benchmark Brent crude oil futures have risen above $US100 a barrel, hitting a more than six-week high and breaching the symbolic threshold for the first time since July 24 as intensifying conflict in the Middle East heightened concerns about oil flows.
Brent crude futures were up $US2.01, or 2.05 per cent, at $US99.93 a barrel by 6.02pm AEST after earlier touching $US100.19, while US West Texas Intermediate crude was up $US1.49, or 1.60 per cent, at $US94.52 a barrel.
Brent crude prices have risen by a quarter since early last month as hopes fade for a permanent resolution to the six-month-old US-Iran conflict.
Since the Iran war began on February 28, Brent has surged as high as $US126.41 a barrel, a peak reached on April 30.
This week, attacks by Iran-backed Houthis on Saudi energy facilities set oil installations ablaze, threatening a significant expansion of the conflict.
The attacks also threaten crude shipments via the Red Sea, which has been a key alternative route to the crucial Strait of Hormuz, where oil flows have been severely curtailed since the February 28 start of the Iran war.
“Market participants appear to be pricing in a more prolonged conflict in the Middle East as well as the risk that the latest escalation in military strikes disrupts oil flows from the Middle East,” said Hamad Hussain, senior climate and commodities economist at Capital Economics.
“The key risk is whether the recent attacks on oil tankers lead to fewer ship-to-ship transfers taking place in the Gulf of Oman, which have so far played a key role in providing oil to global markets and keeping a lid on prices.”
A growing number of banks, including Goldman Sachs, Bank of America and HSBC, have raised their crude price forecasts in recent days.
In the week before a resumption in fighting on August 30, roughly eight million to nine million bpd had flowed through Hormuz, double the previous week’s volume, according to Rystad Energy’s Chief Economist Claudio Galimberti, although more recently it had fallen below two million bpd.
“I think the market is trying to treat this rise in energy prices as a one-off. It’s not. This is structural. It’s not going away, and it’s part of what I would argue as a security premium. And it’s only going to get bigger,” said Jeffrey Currie, co-chairman at Abaxx Markets.
While non-OPEC oil producers including the United States, Canada and Guyana have ramped up output, the International Energy Agency said last month it expected global oil supply would fall this year by 4.3 million bpd, or about four per cent.
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