Brent Crude Oil Prices Reach US$95, Increasingly Vulnerable
Oil prices rose to their highest level in nearly six weeks on Wednesday (July 22nd), fueled by concerns about supply disruptions from the Middle East. Brent briefly reached US$95.47 per barrel, while the market continued to monitor the escalating conflict between the United States and Iran.
Brent crude rose US$2.23, or 2.45%, to US$93.24 per barrel, while West Texas Intermediate (WTI) gained US$2.18 to US$86.18 per barrel. Both benchmarks reached their highest levels since June 11th.
Supply concerns were further evident in the widening of the three-month Brent timespread to US$10.89 per barrel, the widest since May 22nd. This backwardation indicates that the market perceives short-term supply as increasingly tight.
Tensions escalated after the US military launched its 11th consecutive night of strikes against Iran. President Donald Trump also warned that the US would bomb and destroy bridges or power plants any time Tehran targets ships in the Strait of Hormuz.
The risk also extended to the Red Sea and Bab el-Mandeb after Iran-backed Houthis threatened a Saudi oil tanker. The European Union naval force warned ships linked to Israel, the US, or Saudi Arabia to avoid the Red Sea and Gulf of Aden due to the increased risk of attack.
As a result of the market impact, oil prices have the potential to remain strong as long as threats in the Strait of Hormuz, Bab el-Mandeb, and the Red Sea remain unabated. If tankers continue to reroute through the Suez or detour around Africa, shipping costs could rise and supply to Asia could be disrupted. Rising oil prices could also trigger energy inflation, pressure stocks, reinforce expectations of high interest rates, and make the US dollar and gold more volatile. (arl)
Source: Newsmaker.id
