Oil prices climbed by more than $4 per barrel (bbl) on Monday 8 June following renewed Israeli strikes on Iran and attacks on Lebanon, triggering concerns among investors over the stability of supply from the Middle East.
As of 06:09 GMT, Brent crude was trading at $97.15/bbl, up $4.42, or 4.47%, compared to the previous trading session's closing price. Meanwhile, US crude rose by $4.07, or 4.50%, to $94.61/bbl, reported Reuters.
The increase in prices comes after Israel confirmed on Monday that it had targeted a petrochemical plant in south-west Iran as well as hitting other military locations. This marks the first strike on an Iranian energy facility since the ceasefire agreed on 8 April.
Tensions in the region have escalated, with hopes fading for a resolution to the broader conflict and a resumption of normal crude shipments through the Strait of Hormuz.
The strait is a key transit route for around 20% of global oil and liquefied natural gas (LNG).
Oil prices, which had dropped on Friday in anticipation of easing tensions, have jumped by nearly 60% since late February. However, they remain below the March peak when Brent approached $120/bbl.
In related actions, Iran fired missiles at Israeli targets on Sunday in response to Israeli operations in Lebanon.
In an interview with Russian newspaper Izvestia published on Monday, Iran’s Ambassador to Moscow, Kazem Jalali, said: “Of course, this strait will be open, but with new conditions to be determined by the Iranian and Omani authorities.”
Exports through the Strait of Hormuz have been severely restricted since February following attacks on Iran and the blockade of Iranian ports by the US.
In response to ongoing disruptions, Opec+ (Organisation of Petroleum Exporting Countries+) has decided to raise oil output targets for a fourth consecutive month. The group will increase collective quotas of its members by nearly 600,000 barrels per day (bpd) between April and June, reported Reuters.
Opec data shows that the group’s actual output fell significantly, averaging 33.19 million barrels per day (mbbl/d) in April, down from 42.77mbbl/d in February. The decline was largely because of reduced exports from Gulf countries.
According to Opec, the seven OPEC+ members agreed on Sunday to lift production targets by 188,000bpd starting in July.
Meanwhile, Igor Sechin, CEO of Russian energy company Rosneft, claimed that US energy companies had benefitted from the situation in the Strait of Hormuz. However, he warned continuing instability in the strait could weaken long-term demand for oil, reported Reuters.
Russia reported a 32.4% year-on-year increase in oil and gas tax revenues in May, buoyed by higher global prices since the conflict escalated.
The US has extended a sanctions waiver to enable vulnerable countries to purchase Russian seaborne oil.
