- Brent crude rises nearly three per cent to $107.60 per barrel.
- Talks involving Iran and Gulf states on the Strait of Hormuz have been postponed.
- Saudi Arabia suspends operations on its East West oil pipeline following drone attacks.
- Brent has gained nearly 80 per cent since the start of the year.
Oil prices moved higher on Monday as uncertainty over the Strait of Hormuz deepened and Saudi Arabia halted operations on a major crude oil pipeline.
Brent crude for November delivery rose nearly three per cent to $107.60 per barrel, bringing the benchmark closer to the $110 mark.
The latest increase followed a slight decline on Friday after crude prices had recorded strong gains in the preceding trading sessions.
Market pressure intensified after Oman announced that planned discussions between Iran and several Gulf states over the Strait of Hormuz had been postponed.
Omani Foreign Minister Badr al Busaidi said the delay was intended to provide more time to create conditions for agreement among the parties.
The Strait is a major route for global oil shipments, making developments around its operation particularly significant for crude markets.
Further pressure came from Saudi Arabia, which suspended operations on its East West pipeline following drone attacks in the Riyadh and Medina regions.
The pipeline transports crude from the Persian Gulf to the Red Sea and offers Saudi Arabia an alternative export route that bypasses the Strait of Hormuz.
The suspension has raised concerns about the potential impact on Saudi crude exports, with analysts warning that a further reduction in supplies from the world’s largest oil exporter could push prices higher.
Despite the latest rise, Brent remains below its late April peak of more than $126 per barrel.
The benchmark has nevertheless gained almost 80 per cent since the beginning of the year, reflecting the heightened pressure on global oil supply.
THE ISSUES
- The postponement of talks over the Strait of Hormuz adds another layer of uncertainty to a market already sensitive to disruptions along major oil shipping routes.
- Saudi Arabia’s East West pipeline provides an alternative route for crude exports when shipments through the Strait face disruption. Its suspension therefore creates an additional supply concern.
- A further reduction in Saudi exports could have a broader effect on global crude prices because of the country’s importance to international oil supply.
- The near 80 per cent increase in Brent prices since the start of the year points to sustained volatility in the oil market, even though prices remain below the recent peak.
WHAT’S BEING SAID
“The postponement was aimed at creating conditions for consensus.” – Badr al Busaidi, Omani Foreign Minister
WHAT’S NEXT
Market attention will remain focused on developments around the Strait of Hormuz, the resumption of the postponed talks and the extent of disruption to Saudi oil exports.
BOTTOM LINE
Oil prices are facing renewed upward pressure as diplomatic efforts around Hormuz stall and Saudi Arabia suspends an alternative crude export route. Further supply disruptions could push Brent closer to or above the $110 per barrel level.
SOURCE: BizWatchNigeria.Ng
