Oil prices may surge to alarming $150 or $200 a barrel if the disruption in energy trade owing to the near-closure of Strait of Hormuz continues for another six to eight weeks, energy market consultancy FGE NexantECA said.
While the conflict between United States, Israel and Iran – which has also embroiled other countries in West Asia – continues, oil prices have soared this month.
“Every week, 100 million barrels of oil is not going through, and every month, 400 million barrels are not going through,” Bloomberg cited Chairman Emeritus Fereidun Fesharaki as saying. Fesharaki told Bloomberg Television that within a period of time, the losses to the market could be “astronomical.”
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The Strait of Hormuz, which serves as the passage for almost a fifth of the world’s energy supply, is closed to all but a handful of vessels. Owing to this, Persian gulf producers are shutting-in millions of barrels of daily supply.
‘Doesn’t matter what the President says’
While US President Donald Trump has, for the past few days, maintained that the talks with Iran have been “productive” and are “going well”, Fesharaki dismissed the effectiveness of verbal interventions on a possible end to the conflict.
“It doesn’t matter what the president says on the political front,” Fesharaki told Bloomberg Television, saying the actual reality of supply disruptions would ultimately lead to an increase in prices. “The market will choke, and the prices will go up,” Fesharaki said.
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Apart from Fesharaki, Macquarie Group Ltd has said that oil may hit $200 a barrel if the Strait of Hormuz remains blocked and the disruptions continue. Societe Generale SA also suggested there was scope for “credible spikes” toward $150, Bloomberg reported.
Meanwhile, futures were volatile on Tuesday after a fresh attack on a tanker near Dubai, which led to prices climbing. Oil futures swung after a report by Wall Street Journal stating Trump may be willing to end military operations in Iran despite the strait remaining closed.
