Oil soars above $100 despite historic release of reserves as supply fears persist
A fuel pump at a gas station operated by Exxon Mobil in Cairo
Hong Kong/London (CNN) — Brent crude oil surged past $100 a barrel Thursday before dipping below that landmark threshold, though oil prices were still up on the day as further attacks on ships in the Gulf spooked energy traders.
Meanwhile, the International Energy Agency warned that supply losses would increase further if ships didn’t resume transit through the Strait of Hormuz, ordinarily the conduit for around a fifth of daily global oil production.
“The war in the Middle East is creating the largest supply disruption in the history of the global oil market,” the IEA said in its monthly oil market report.
Brent crude, the global oil benchmark, was up 5% to trade at around $96 a barrel. WTI, the US benchmark, gained 4% to trade at $91 a barrel.
Prices have stayed high despite 32 of the world’s biggest economies, including the United States, agreeing Wednesday to add 400 million barrels of oil to the global market, the biggest-ever release of emergency oil stocks.
The dramatic move, led by the IEA, is aimed at shoring up crude supplies disrupted by the war in Iran and capping oil price rises. But a near-blockade of the Strait of Hormuz – which is choking off around 15 million barrels of crude oil and 5 million barrels of other oil products from global markets every day – means that the 400 million barrels of crude would be absorbed in just 26 days.
“From a market perspective, the problem is that investors are increasingly pricing in a more protracted conflict that causes extensive economic damage,” Jim Reid, the head of global macroeconomic research at Deutsche Bank, wrote in a note Thursday.
Attacks on ships, oil output cuts
Iran has ramped up attacks on oil tankers, striking two foreign oil tankers in Iraqi waters Thursday. The United Kingdom’s maritime agency also said Thursday that another vessel in the Persian Gulf had been struck, the sixth ship to come under attack in the last two days.
Those incidents highlight the difficulty in resuming transit through the Strait of Hormuz, which is key to returning the flow of oil to global markets to normal levels. Also of concern are oil output cuts, which have deepened as Middle East producers have few routes to export their crude, as storage tanks reach capacity and given Iranian attacks on critical energy infrastructure.
According to the IEA, most of the seven Gulf countries – Saudi Arabia, Iraq, the United Arab Emirates, Kuwait, Qatar, Bahrain and Iran – which depend on the strait for exporting their crude “have to some degree substantially reduced production.”
By March 10, the cuts were estimated to amount to at least 10 million barrels a day of crude and other oil products, the IEA said. “In the absence of a rapid resumption of shipping flows, supply losses are set to increase,” it added.
Stock markets continued to take their cue from developments in the Middle East, trading overwhelmingly in the red Thursday in Europe, with a more mixed picture in Asia. US futures also pointed to a lower open.
Investor sentiment toward equities continues to be “anchored” on the evolution of the conflict, Neil Wilson, a strategist at trading platform Saxo, told CNN.
This article has been updated.
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CNN’s Olesya Dmitracova contributed to this report.
