OPEC+ boosts oil production after attacks on Iran
Eight countries that are part of the OPEC+ oil cartel will increase crude oil production as US and Israeli forces launch a major attack on Iran and the country responds with retaliatory strikes on Israel and US military installations around the Gulf, disrupting oil shipments from the region.
The Organization of Petroleum Exporting Countries announced at its meeting on Sunday that it will increase production by 206,000 barrels per day in April; this was more than analysts expected.
Countries that increased production include Saudi Arabia, Russia, Iraq, United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman.
Attacks across the region, including two ships passing through the Strait of Hormuz, the narrow mouth of the Persian Gulf, could restrict countries’ ability to export oil to the rest of the world.
This will likely cause crude oil and gasoline prices to rise.
According to Rystad Energy, approximately 15 million barrels of crude oil per day (about 20 percent of the world’s oil) are transported through the Strait of Hormuz, making it the world’s most critical oil choke point.
Tankers passing through the strait, which has the Iranian border in the north, carry oil and gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, UAE and Iran.
Iran temporarily closed parts of the strait in mid-February because it said it was a military exercise. Further disruption in this shipping channel could result in reduced supply and higher oil prices.
“About one-fifth of global oil supply passes through the Strait of Hormuz, a vital artery for world trade, meaning markets are more interested in whether barrels can move than excess capacity on paper,” said Jorge León, senior vice president and head of geopolitical analysis at Rystad.
“If flows in the Gulf are restricted, additional production will provide limited immediate relief, making access to export routes far more important than primary production targets.”
Iran exports approximately 1.6 million barrels of oil per day, mostly to China; If Iran’s exports are disrupted, China may need to look elsewhere for supplies, another factor that could increase energy prices.
Energy experts believe oil prices could rise once barrels begin trading late Sunday. Analysts at Rystad predict that the price of a barrel of Brent crude, the international standard, could rise by as much as US$20 ($A28) when trading opens.
Brent crude closed at a seven-month high of US$72.87 ($A102.56) a barrel on Friday.
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