Middle East War Shakes Supply, Brent Rises 17% in Week
Oil prices posted their biggest weekly rally since 2022 after the Middle East war triggered major disruptions in energy markets, with producers, importers, and shippers struggling to adjust supply flows. However, prices rebounded slightly lower in Asia on Friday after signals from the US government to ease price pressures.
Brent rose about 17% for the week, but fell below $85 per barrel on Friday. As of 11:23 a.m. Singapore time, Brent for May settlement was down 1% at $84.55 per barrel, while WTI for April was down 1.3% at $79.98 per barrel, though still up about 17% on the week.
The main driver is supply risks from the Gulf region, particularly as shipping traffic through the Strait of Hormuz is said to have nearly halted and ship tracking data indicates maritime traffic in the waterway has collapsed. This situation has hampered global market supply, triggered partial production shutdowns, and exacerbated disruptions after refineries and tankers were reportedly affected.
Market concerns have increased as conflict is said to have involved around a dozen countries since the US and Israel launched their campaign on February 28. Iran has asserted its unwillingness to negotiate and is prepared for a possible ground invasion, while Israel continues its offensive, and Saudi Arabia and Qatar have claimed to have intercepted drone and missile attacks.
On the policy front, the US Treasury Department has eased restrictions allowing India to purchase Russian oil through a short-term waiver, but authorities have emphasized that this will only allow transactions for oil already "stranded at sea." The US government is also considering various options to stem the surge in oil and gasoline prices, including the possibility of releasing emergency stocks, although it has not yet moved to use the Strategic Petroleum Reserve.
Pressure is beginning to show across the product chain and the real economy. Low-sulfur gasoil contracts in Europe have surged by about 42% so far this week, while average retail gasoline prices in the US are said to have risen by about 9%. Indications of short-term supply tightness are also reflected in the Brent market structure: the prompt spread widened to $4.35 per barrel in backwardation, from 58 cents a month ago.
Market participants are now monitoring three key factors: how long the disruption in Hormuz persists, how aggressive the policy response (including the release of strategic reserves) will be, and how quickly the surge in energy costs will feed into inflation expectations. Goldman Sachs assesses a price scenario above $100 per barrel as possible if the disruption continues, although its base case still points to a gradual recovery in shipments and a futures average of around $76 per barrel in the second quarter. (asd)
Source: Newsmaker.id
