Motorists taking more shellacking

Motorists taking more shellacking | Daily Tribune

Leo Bellas, president of Jetti Petroleum Inc., said global oil prices have resurged as the renewed conflict in the Middle East threatens one of the world’s most critical energy shipping routes.

“World oil prices have rebounded significantly due to concerns of further disruption to the oil supply as the Strait of Hormuz remains largely closed to vessel traffic, and growing security risks in the Bab el-Mandeb Strait expanded the conflict and raised the threat to global energy supplies and trade beyond the Persian Gulf,” Bellas said on Friday.

He said diesel prices have risen the most as fears over supply disruptions intensified.

Diesel price benchmarks surged further amid renewed supply concerns. As the Gulf is a major source of diesel and tanker flows were only beginning to recover before hostilities flared again, renewed military strikes and a reciprocal blockade of the Strait of Hormuz by the US and Iran have raised fresh supply concerns.

“Refinery disruptions and further constraints on Middle Eastern and Russian supply are keeping middle distillate supplies tight, and prices elevated,” he said.

Gasoline prices have also continued to rise despite improving exports from China, as geopolitical risks remain the dominant driver of the market.

“Despite an easing in Chinese export restrictions and a rise in prompt supply from China, renewed risk of supply disruptions and lingering concerns about the delayed recovery of Middle Eastern gasoline exports have helped buoy gasoline prices further,” Bellas said.

Through the roof

Oil prices surged past $100 a barrel on Thursday as Iran-backed Houthi rebels targeted Red Sea shipping, as threats by US President Donald Trump to strike them in return sent equity markets slumping.

The international benchmark Brent North Sea oil contract soared seven percent to over the symbolic $100 a barrel level, as the attacks potentially opened a new front in the Middle East war and Trump threatened the Houthis with “major military punishment.”

Iran, meanwhile, vowed to continue striking the Gulf region so long as it remains under attack from US strikes.

The Red Sea attacks added to concerns about oil supply at a time when deliveries through the Strait of Hormuz have been severely impaired.

Saudi Arabia had been using the Red Sea to export millions of barrels of oil that normally flowed through the Strait of Hormuz, so the closure of that shipping channel would remove more oil from the market.

“If Saudi Arabia is unable to move the additional quantities of crude oil that they redirected from the Persian Gulf, it means that supply disruption is that much worse for the rest of the world at a time that we continue to draw down our commercial inventories,” Andy Lipow of Lipow Oil Associates said.