On Monday, international oil prices surged significantly as tensions between Iran and the United States escalated. The main oil price, Brent, rose over 5% to about $93 per barrel. West Texas Intermediate crude, the U.S. benchmark, increased over 6% to the same price level. This marks their largest increases in nearly a month, though prices remain below past wartime highs.
Negotiations between Iran and the United States regarding the extension of a cease-fire and reopening of the Strait of Hormuz appear fragile. The strait, a key channel for oil transportation bordering Iran’s south, remains closed. The situation further deteriorated after recent attacks by Iran, the U.S., and Israel, casting doubt on the peace talks.
The U.S. carried out airstrikes in Iran over the weekend. In response, Iran’s Revolutionary Guards struck an American air base, retaliating for U.S. actions against a communications facility. These hostilities have stoked fears over the longevity of global oil and fuel reserves if the strait remains shut.
Helima Croft, head of global commodity strategy at RBC Capital Markets, commented, “There has been quiet panic building.”
The ongoing conflict has led Persian Gulf countries to cut oil production by over 14 million barrels daily, nearly 14% of the prewar global supply, as stated by the International Energy Agency (IEA).
Some strategies have mitigated these losses. China decreased its oil imports. Multiple nations released supplies from emergency reserves. The U.S., Canada, Brazil, and other oil producers increased exports, according to the IEA. Additionally, high prices have curbed oil demand.
Energy leaders are growing concerned about reduced inventories of oil and essential fuels like gasoline and diesel. Exxon Mobil’s senior vice president, Neil Chapman, highlighted the issue at a recent conference.
Neil Chapman remarked, “We’re approaching unheard-of inventory levels. People can debate whether it will take two or three weeks to hit those low levels, but prices will surely rise when it happens.”
The U.S. is withdrawing around nine million barrels of oil per week from federal reserves. At this rate, strategic reserves may reach their lowest since 1983 by next week, as per Energy Information Administration data reviewed by the New York Times.
Amos Hochstein, a former senior adviser on energy and foreign policy, noted, “That’s a debt we’re going to have to pay back.”
This article was contributed by Rebecca F. Elliott, a Times energy reporter, and Joe Rennison, a journalist covering financial markets.
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