Key facts
- Oil prices surged past $95 a barrel due to renewed US-Iran tensions and threats to Red Sea shipping lanes.
- Brent crude rose nearly 4% to $94.25, and US crude increased 3% to $87.
- Flows through the Strait of Hormuz have significantly decreased.
- US Strategic Petroleum Reserve inventories are at their lowest level since 1983.
- Refiner profit margins are increasing, indicated by wider crack spreads.
- One research firm predicts oil prices could reach $150 a barrel.
Oil prices have surged past $95 a barrel amid escalating Middle East tensions and threats to crucial shipping lanes, reversing a period of market calm. Brent crude rose nearly 4% to $94.25 a barrel, while US crude increased 3% to $87, as traders reacted to renewed fighting and a breakdown in confidence regarding a US-Iran resolution.
Analysts warn of potential 'cascading damage' to energy markets, with crude flows through the Strait of Hormuz plummeting to near-zero. The US has also significantly depleted its Strategic Petroleum Reserve, with stocks falling to their lowest level since 1983. Wider crack spreads, indicating increased profit margins for oil refiners, suggest growing tightness in supply.
Some market professionals predict oil prices could soar as high as $150 a barrel. The current high crack spreads suggest that both oil and oil products may be mispriced, with the market indicating a product shortage.