Nigerian motorists may pay more for fuel as Brent crude has risen above $100 a barrel for the first time since July 24 amid escalating fighting in the Middle East which fuels concerns about further disruptions to global oil supplies.
Brent futures climbed 2.2 per cent to $100.07 a barrel by 0721 GMT on Wednesday, while US West Texas Intermediate (WTI) crude rose 1.83 per cent to $94.73 a barrel. Brent has gained about 25 per cent since early August as hopes for a lasting resolution to the US-Iran conflict fade.
The latest price surge follows a sharp escalation in hostilities across the region, including attacks by Iran-backed Houthi rebels on Saudi Arabia while Nigerians currently buy petrol between 1,290 to N1,310 per litre nationwide.
Houthis launched missile and drone strikes on several Saudi cities this week, damaging energy facilities and setting oil installations ablaze. Saudi authorities said at least 73 people were wounded in the attacks.
The strikes have raised fears that the conflict could spread to the Red Sea, another major route for global oil shipments. The Red Sea had served as an alternative route for tankers as traffic through the Strait of Hormuz became increasingly restricted.
Oil flows through the Strait of Hormuz, one of the world’s most important energy chokepoints, have already been severely disrupted since fighting between the United States and Iran resumed.
According to Rystad Energy, between eight million and nine million barrels of oil per day were flowing through the strait in the week before fighting resumed on August 30. More recently, flows have fallen below two million barrels per day.
The disruption is significant because the Middle East supplies a substantial share of the world’s oil. Traders are increasingly concerned that prolonged attacks on energy infrastructure and shipping could remove more supplies from an already tight market.
The International Energy Agency has warned that global oil supply could fall by 4.3 million barrels per day this year, or about 4 per cent, despite increased production from countries including the United States, Canada and Guyana.
Several major banks have also raised their forecasts for oil prices as the conflict intensifies. Goldman Sachs, Bank of America and HSBC are among financial institutions that have revised their expectations higher.
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The surge above $100 is also raising concerns about inflation worldwide. Higher crude prices can increase the cost of petrol, diesel, aviation fuel, transportation and manufacturing, potentially making it more difficult for central banks to cut interest rates.
The development comes as financial markets closely monitor the next moves by the United States and Iran and efforts to contain the conflict.
Analysts warn that continued attacks on oil infrastructure or shipping could push prices substantially higher, particularly if the disruption around Hormuz and the Red Sea persists.
For consumers and businesses around the world, the return of Brent above the psychologically important $100-a-barrel threshold is an indication that the Middle East conflict is increasingly becoming a global economic concern.