Oil surges past $100 a barrel for 1st time in 4 years

Oil prices surged over the $100-a-barrel threshold for the first time in almost four years, as traders bet widening conflict in the Middle East would lead to weeks-long supply disruptions.
Brent, the international benchmark, leapt almost 20 per cent in Asia trading on Monday to $109 a barrel. US marker, West Texas Intermediate, rose 20 per cent to $109.05.
It follows a record weekly increase in oil prices last week following US and Israeli attacks on Iran on February 28, and a decision by some of the Middle East’s largest producers to begin curtailing production over the weekend.
President Donald Trump said on Truth Social shortly after trading began: “Short term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for U.S.A., and World, Safety and Peace. ONLY FOOLS WOULD THINK DIFFERENTLY!”
Traders warned that the oil sector was facing one of its greatest ever challenges, with Iran’s attacks on tankers in the Strait of Hormuz affecting production in countries responsible for about a quarter of global crude supply.
“Traders have shifted away from being unable to imagine a prolonged closure of the Strait of Hormuz a week ago, to pricing in the largest oil disruption — by a factor of two — in history,” said Bob McNally, founder of Rapidan Energy Group and a former adviser to George W Bush.
Saudi Arabia, the United Arab Emirates, Iraq and Kuwait are all either throttling back output or shutting fields entirely, as they risk maxing out storage tanks while crude backs up in the Gulf. Iran’s production had been depressed by years of US sanctions before the war, and its exports have also fallen sharply in the past week.
Further attacks on oilfields and energy infrastructure over the weekend also pose a new threat that could cause prices to soar, just four years after Russia’s full-scale invasion of Ukraine triggered the last energy crisis.
Michael Alfaro, chief investment officer at Gallo Partners, an energy and industrials hedge fund, said the surge in oil prices above $100 reflected growing market concern that de-escalation may not come quickly.
“Product movements through the Strait of Hormuz remain largely halted, and reports that special forces could be deployed to secure uranium sites suggest this may be a more prolonged situation. At the same time, world leaders are warning about the risk of the conflict broadening, with Lebanon, Russia and China potentially becoming involved in different capacities,” he said.
“In the near term that keeps a geopolitical risk premium embedded in crude, and I wouldn’t be surprised to see oil test higher levels before eventually retracing.”
Last week, West Texas Intermediate posted its biggest weekly rise on record, surging 36 per cent to $90.90 a barrel, while Brent crude hit $92.69. Both Brent and WTI were trading around $60 a barrel in early January.
Gains accelerated towards the end of last week, with Brent rising 8.5 per cent on Friday and traders increasingly betting on a prolonged shutdown of the Strait of Hormuz — a chokepoint that normally accounts for at least a fifth of global oil and liquefied natural gas supplies.
Richard Bronze, head of geopolitics at consultancy Energy Aspects, said: “There’s been no real signs of a diplomatic off-ramp emerging while more Gulf producers are announcing production cuts, most tankers still aren’t risking going through the Strait of Hormuz and more energy infrastructure is getting attacked.”
Goldman Sachs, one of the most influential banks in commodity markets, said late on Friday that crude and refined products such as gasoline and diesel could hit all-time highs “if Strait of Hormuz flows were to remain depressed throughout March”.
Brent hit $147.50 a barrel on the eve of the financial crisis in 2008, which, adjusted for inflation, is the equivalent of $218 today.
Refined fuel prices have already soared in the past week, with the Gulf becoming a significant supplier of diesel and jet fuel to Europe in recent years, often replacing Russian supplies.
Saudi Arabia’s oil-producing facilities were attacked for the first time in the current conflict on Saturday, with the kingdom saying it had intercepted 21 drones targeting the 1mn-barrel-a-day Shaybah oilfield, while the Berri field was also attacked.
Kayrros, a company that uses satellites to monitor oil infrastructure, said its latest imaging suggested Saudi Arabia had already reduced oil production as it looked to delay the point it runs out of storage. State oil company Saudi Aramco, the world’s top oil exporter, is rapidly trying to reorientate its crude shipments from the Gulf to the Red Sea through its backup East-West pipeline. (Excerpted from Financial Times)