Oil price sustains over $100 p/b price as market remain volatile

Oil prices experienced extreme volatility this week, surging as high as $115 per barrel on Monday. However, after this sharp rise, Brent crude, the global oil benchmark, dripped to $89 by close of trading same day following assurances that the Iran, US , Israel face off would be done with in no time.

But the attack on vessels and closure of the Strait of Hormuz has further complicated the oil price situation with reports of a 4-4.5 per cent price surge on some days. This has been further compounded by developments around the Strait of Hormuz, a 20 kilometer narrow path, remains critically important as the world’s most vital oil chokepoint, where about one-fifth of global oil and significant natural gas pass through its narrow passage, linking Persian Gulf producers like Saudi Arabia, Iraq, UAE, Qatar to global markets, especially Asia. This makes any disruption in this path a major threat to energy security and global economy

However, prices have stayed high despite 32 of the world’s biggest economies, including the United States, agreeing on Wednesday to add 400 million barrels of oil to the global market. This represents the biggest-ever release of emergency oil stocks.

By yesterday, Brent crude climbed nine per cent to trade just above $100 a barrel. WTI, the US benchmark, rose by a similar margin to trade above $95 a barrel. The high prices are driven by intensified geopolitical tensions in the Middle East, especially after Iran insisted that the Strait of Hormuz would remain shut and as further attacks on ships in the Middle-East caused anxiety.

Iran has reportedly ramped up attacks on oil tankers, striking two foreign oil tankers in Iraqi waters yesterday. Still, according to the United Kingdom’s maritime agency, also yesterday, another vessel in the Persian Gulf was struck, making it the the sixth ship to come under attack in the last two days.

The high prices have led to surging pump prices, with motorists facing significant costs and warnings of further economic strain, including the possibility of inflation.

This week, petrol pump price rose about 45 percent in Nigeria. From a pre Iran, US , Israel war, petrol sold for about 835 per litre in the country.

However these prices have since risen in line with the global rise in crude oil price. In Lagos, as at yesterday, petrol sold for N1, 200 and N1, 300 yesterday across the Lagos metropolis. In Ibadan, Oyo state capital, the commodity sold for N1,300; with the same situation in other adjoining communities in the state.

In the Federal Capital Territory, Abuja, retail outlets also raised their pump prices from the N1, 075 per litre to N1,350 per litre.

The Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), President, Dr Billy Harris, yesterday also warned that “PMS could rise close to ₦2,000 per litre while AGO may approach ₦3,000 per litre if the situation persists.”

Overall, the oil market has been characterised by intense, news-driven price fluctuations, moving from high-price volatility to sharp drops and back up based on daily geopolitical developments in the Middle East.