Oil prices saw a significant rise on Monday, with Brent climbing over 5% to about $93 a barrel, reaching its highest point in nearly a month. West Texas Intermediate crude increased by over 6%, also hitting around $93 a barrel. These rises come amid uncertainty over peace talks between Iran and the United States, which have shown signs of faltering.
The talks have focused on extending a cease-fire and reopening the Strait of Hormuz, a vital channel for shipping oil and other commodities. The discussions are at risk as recent hostilities between Iran, the United States, and Israel continue. The US confirmed strikes in Iran over the weekend, with Iran’s Revolutionary Guards retaliating against an American air base.
“There has been quiet panic building,” said Helima Croft, the head of global commodity strategy at RBC Capital Markets.
Amid these tensions, concerns are mounting over global oil and fuel stockpiles if the strait remains closed. The Persian Gulf countries have reduced output by over 14 million barrels per day, nearly 14% of prewar global supply, according to the International Energy Agency.
To counteract these losses, measures such as reduced oil imports by China, releases from emergency reserves, and increased exports from the US, Canada, and Brazil have been implemented. High oil prices have also dampened demand.
Energy executives warn about dwindling inventories of oil and fuels like gasoline and diesel. Neil Chapman, an Exxon Mobil senior vice president, expressed concerns at a recent conference about reaching historically low inventory levels soon.
The United States has been extracting roughly nine million barrels weekly from a federal stockpile, pushing its strategic reserves to their lowest since 1983, according to data from the Energy Information Administration.
“That’s a debt we’re going to have to pay back,” said Amos Hochstein, a former senior adviser on energy and foreign policy under the Biden administration.
The ongoing geopolitical tensions and oil supply challenges present significant concerns for the global market moving forward.