Oil barrel exceeds $116 for the first time in years
An oil prices earthquake with crude oil prices jumped to levels not seen in years, exceeding the $116 barrier per barrel, in the wake of the military escalation in the Gulf region and the closure of the strategic Strait of Hormuz, one of the world’s most important energy arteries.
According to trading data in the first trading session of the week, on Monday, March 9, prices recorded huge jumps: West Texas Intermediate (WTI): up 19.37%, or $17.31, to $108.77 per barrel, and Brent crude rose 17.08%, or $16.01, to $109.31 a barrel.
Since last week, oil prices have jumped 35% overall, the biggest rise in energy markets in 43 years.
This is the first time that the price of oil has crossed the $100 per barrel barrier since 2022, when the Russia-Ukraine war broke out.
The direct reason behind this missile jump lies in the escalation of the war in the Middle East, specifically the military confrontation between Iran and the US-Israeli alliance.
Cross-shelling and security threats have effectively closed the Strait of Hormuz or significantly disrupted navigation in it.
The strait, which lies between Iran and the United Arab Emirates, is a narrow waterway that is only 50 kilometers wide, but it’s considered the most important transit point for oil in the world, through which about one-fifth of global oil production passes (about 20 million barrels per day).
Any threat to navigation in it automatically triggers a violent jolt in energy markets.
In a parallel development, three of the largest oil producing countries in the Gulf region announced that they were cutting production or acting cautiously, which exacerbated the supply crisis and supported the rise in prices:
Kuwait: OPEC’s fifth-largest producer announced on Saturday that it had cut production significantly, officially attributing the decision to Iranian threats against the passage of ships through the Strait of Hormuz.
Iraq: The organization’s second-largest producer, it has also reduced its oil production under the current circumstances.
The UAE: OPEC’s third-largest producer has announced that its cautiously producing oil in offshore fields to deal with limited storage capacity.
The sources revealed that the storage warehouses in these countries have become almost full, and don’t have room for further production, forcing them to reduce the flow.
This crazy rise in prices threatens to ignite a new inflationary wave in the global economy, which hasn’t yet fully recovered from previous shocks.
Oil-importing countries, especially in Europe and Asia, will face high energy bills, which will reflect on the prices of goods and services and increase the burden of living on citizens.
All eyes are now on the movements of major consuming countries and the possibility of their intervention by withdrawing their strategic oil reserves to calm the markets, but in light of the continuation of the war and the closure of waterways, the future of oil prices remains hostage to the field.
