With the ongoing conflict in the Middle East flaring anew, the global oil market has come under serious risk. Analysts warn that if the current situation continues or turns into a full regional war, the price of crude oil could top even 150 dollars a barrel.
According to energy-sector analysts, in the months since the Iran war began, the world oil market had managed to absorb the big shock by using various alternative supply routes. As a result, the pressure of inflation and rising energy costs on consumers was comparatively limited. Although oil prices rose during the war, they did not reach the level of 128 dollars in 2022 or the record 146 dollars a barrel before the 2008 global recession. But the situation in the Middle East is now changing fast, and those alternative arrangements are weakening one by one.
Helima Croft, head of global strategy at RBC Capital Markets, said the conflict had now entered a far more dangerous phase. Until now the market had assumed that an alternative route could be found for any crisis. But this time that assumption may change.
On Thursday the international price of crude oil crossed 100 dollars a barrel for the first time since May. At the same time the price of petrol in the United States rose above 4 dollars a gallon and diesel above 5.20 dollars. The bond market too is signalling that the biggest inflation fear of US President Donald Trump’s second term so far has now emerged.
Until now it had been possible to move large volumes of oil through the Red Sea, avoiding the conflict. But the situation has now changed.
Because of Iran’s attacks, the movement of oil tankers through the Strait of Hormuz has almost come to a standstill. As a result, about 7 million barrels of oil a day were being diverted through alternative pipelines to the Red Sea route. But that route too has now come under risk. Because of the blockade by Iran-backed Yemen’s Houthi group, the Bab al-Mandab strait has also become effectively unusable.
This has raised fears that Saudi Arabia’s exports of about 5 million barrels of oil a day could be disrupted.
Although it is possible to send oil by an alternative route through the Suez Canal, large, fully loaded oil tankers cannot use that route. As a result, a four-week journey could stretch to as long as eight weeks.
A fresh crisis over insurance too
At the start of the conflict, insurance costs rose because of war risk, but ships were at least getting insurance. Now the situation is even more complex. Iran is reported to be again planning to impose a toll of 1 to 2 dollars per barrel of oil.
The Lloyd’s Market Association (LMA) has said that if a ship pays Iran this toll, it could be treated as a violation of US sanctions. That could void the entire insurance of the ship concerned.
On the other hand, if the toll is not paid, Iran is threatening to attack. As a result, ships are effectively finding no safe alternative.
Russia is deepening the crisis too
According to analysts, the oil crisis is now not confined to the Middle East. Ukrainian drone strikes have damaged several Russian oil refineries and a terminal of the Caspian Pipeline Consortium on the Black Sea.
As this has created a fuel shortage in Russia, the country has stopped exporting diesel. Before the war Russia exported about 800,000 barrels of diesel a day, about 12 percent of the global diesel supply.
In addition, the disruption to the Black Sea pipeline has raised fears of a further fall of about 1.7 million barrels of crude a day from the global market.
Global reserves falling fast
According to analysts, the biggest difference in the current crisis is the fast fall in global oil reserves. Before the war began, crude reserves in various countries were at record highs. But over the past five months those reserves have fallen by about 1.3 billion barrels.
The US strategic petroleum reserve too has fallen to its lowest level since 1983. Since last spring, 116 million barrels of oil have been used from it. At the same time, the country’s commercial oil reserves have also come close to the lowest operational limit.
China’s reserves also nearing empty
Over the past few months oil demand was somewhat lower, because China had stockpiled a large amount of oil before the war began. But according to analysts, China will not be able to rely on reserves alone for much longer. Within the next three to four months the country will have to sharply increase oil imports again.
Where could oil prices go?
According to Dan Struyven, head of oil research at Goldman Sachs, if the current situation stays unchanged, the price of crude could again rise above 120 dollars a barrel, as in 2022, by this October.
RBC Capital Markets’ Helima Croft fears worse. In her view, if a full regional war breaks out in the Middle East, the international price of crude could set a new record and cross even 150 dollars a barrel.
বাংলায় মূল প্রতিবেদন পড়ুন · Read the original Bengali report