Oil prices climbed sharply above US$100 a barrel on Sunday after major Middle Eastern producers cut output amid the continued closure of the Strait of Hormuz during the conflict with Iran.
The two main oil price benchmarks rose sharply. US benchmark West Texas Intermediate (WTI) – the price used for oil traded in the United States -jumped 17%, or $15.32, to $106.22 a barrel. The global benchmark Brent crude, widely used to price oil around the world, rose 15%, or $14.28, to $106.92 a barrel.
US crude had already surged about 35% last week, marking its largest weekly gain since futures trading began in 1983. The last time oil prices exceeded $100 a barrel was in 2022, following Russia’s invasion of Ukraine.
Shortly after prices crossed the $100 mark when trading opened on Sunday evening, US President Donald Trump wrote on his Truth Social platform that the rise in “short-term oil prices” was a “very small price to pay” for eliminating what he described as Iran’s nuclear threat.
“Only fools would think differently,” he added.
Kuwait, the fifth-largest producer in the OPEC group, announced precautionary cuts to oil production and refinery output on Saturday, citing “Iranian threats against safe passage of ships through the Strait of Hormuz”. State-owned Kuwait Petroleum Corporation did not specify the scale of the reductions.
Production in Iraq, OPEC’s second-largest producer, has also fallen sharply. Output from its three main southern oilfields has dropped by about 70% to 1.3 million barrels per day, according to three industry officials who spoke to Reuters. Those fields had previously produced about 4.3 million barrels per day before the conflict.
The United Arab Emirates, OPEC’s third-largest producer, said it was “carefully managing offshore production levels to address storage requirements”. However, the Abu Dhabi National Oil Company said its onshore operations were continuing normally.
Several Gulf producers are cutting output as storage facilities fill up, with oil shipments unable to move through the Strait of Hormuz. Tanker operators have become reluctant to pass through the narrow waterway amid fears of possible attacks by Iran.
Roughly 20% of the world’s oil supply normally passes through the Strait, making it one of the most critical energy routes globally.
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