Oil Surges Near $120
Oil prices surpassed $117 per barrel on Monday, March 9, after major Middle Eastern producers cut production and shipping through the Strait of Hormuz reportedly came to a near-halt. Brent briefly surged as much as 24% to $114.99 per barrel, while WTI surged 27%, its biggest intraday move since April 2020, reflecting the supply risk premium that has returned to dominate the energy market.
Physical supply disruptions are becoming more pronounced as Kuwait and the United Arab Emirates have begun reducing output, while Iraq has partially shut down production since last week. The Hormuz shutdown exacerbated congestion, as the narrow waterway typically handles about a fifth of global oil trade, and attacks on energy infrastructure have also driven up oil and gas prices.
Geopolitical tensions have also heightened fears of a new “wave of inflation.” US retail gasoline prices reportedly rose to their highest level since August 2024, while President Donald Trump described the short term as “a small expense” and said prices would fall once the Iranian nuclear threat is “over,” but also left open the possibility of expanding attack targets. In Iran, a top leadership change has reportedly taken place, with the Revolutionary Guard Corps declaring loyalty, while the US has ordered some employees in Saudi Arabia to leave the country, according to media reports.
The market now assesses the risk of further upside if logistical bottlenecks and flow disruptions persist. JPMorgan estimates that production outages in the Middle East could expand to more than 4 million barrels per day by the end of next week if stockpiling and bottlenecks persist, while threats to energy facilities are increasing, including a drone incident at the Shaybah field and disruptions at the Ras Tanura facility. Indications of near-term tightness are also evident in the Brent prompt spread, which widened to more than US$8.98 per barrel in backwardation, from around 62 cents a month ago, indicating tighter spot supply amid persistent geopolitical risks. (Asd)
Source: Newsmaker.id
