Oil prices are on the verge of hitting $100 a barrel for the first time in almost four years, as major Middle Eastern producers begin to cut output due to ongoing US and Iran conflicts. This situation has led to crude oil backing up in the Gulf, impacting countries responsible for approximately a quarter of global crude supply. Saudi Arabia, the UAE, Iraq, and Kuwait are all reducing production or shutting down fields, while Iran's exports have also significantly decreased.
Escalations, including attacks on Saudi Arabian oil facilities and continued threats to shipping in the Strait of Hormuz, are further driving prices up. Last week, US West Texas Intermediate (WTI) crude saw its largest weekly increase on record, surging 36% to $90.90 a barrel, while international benchmark Brent crude reached $92.69. Both benchmarks were trading around $60 a barrel in early January. Brent rose 8.5% on Friday, with traders increasingly anticipating a prolonged closure of the Strait of Hormuz, which typically handles a fifth of global oil and liquefied natural gas supplies.
Analysts like Richard Bronze from Energy Aspects expect Brent prices to reach triple digits early next week if the situation does not improve, noting the lack of a diplomatic solution and continued production cuts by Gulf producers. Goldman Sachs warned on Friday that crude and refined products could reach all-time highs if Strait of Hormuz flows remain constrained. The bank had previously projected oil prices could rally to $120 a barrel if attacks on shipping intensify. Refined fuel prices have already soared, particularly impacting Europe, which relies on the Gulf for diesel and jet fuel.
