As of 1105 GMT Wednesday, oil prices were continuing their upward surge, this time by about 5 percent with Brent hovering at $95.47 per barrel, as U.S. president Donald Trump warned Iran-backed Houthis that he would “take care of things” if they attempted to block Saudi Arabia naval transits in the Red Sea.
Trump’s comments came after Washington accused Iran of flying Islamic Revolutionary Guard Corps members into Yemen in an attempt to renew confrontation between the Houthis and the Saudis.
Oil analysts were also tensely awaiting the outcome of Trump’s warning that each time the Islamic republic attacked a ship in the Strait of Hormuz, the U.S. would respond with a strike on bridges or power plants in Iran.
The increase in crude prices this month – to the tune of 30 percent – has been the fastest since the U.S.-Israeli attacks on Tehran began earlier this year, and Goldman Sachs analysts worried that it could put the market on track for $120 per barrel oil by the end of the year unless transit through Hormuz restarts in a meaningful way.
According to MarineTraffic, only 13 ships crossed the vital waterway on Monday, and on Tuesday that number was only 9.
Fatih Birol, executive director of the International Energy Agency, said “cushioning factors” such as transporting crude through alternative routes and the release of emergency reserves of oil had benefitted global oil markets, but there was no room for complacency amid the current escalation in hostilities.
Plus, “Refinery activity and product supplies have not picked up as much as crude deliveries, meaning that markets for refined oil products, including diesel and gasoline, are considerably tighter than those for crude,” Birol said.
As for Wednesday’s contribution to escalating crude prices, Bloomberg noted that “Rising oil prices are threatening a re-acceleration of inflation, just as increases for prices were slowing more than economists expected; that in turn could push the Federal Reserve and other central banks to raise interest rates, which would slow economies and undercut prices for stocks and other investments.”
In other war-related oil news on Wednesday, Asian refiners previously optimistic that the reopening of the Hormuz would bring steadily rising crude volumes from the Middle East, were now reportedly facing delivery delays that could ruin their plans to ramp up processing rates in coming weeks.