Oil market shock: How the Mojtaba effect contributed and what can await us in the coming months
Oil prices jumped 25-30% on Monday morning at the opening of financial markets due to the situation in the Middle East, and – even if after a few hours the increase moderated to about 15% – the level of quotations is not seen since mid-2022.
- Effects also appeared in the gas sector, whose price jumped by 30% in the morning in Europe.
- Pump prices in Romania continue to rise. On Monday morning, in most stations in Bucharest, standard gasoline cost over 8.2 lei per liter.
- A real global energy shock, similar to the one in the 1970s, is shaping up, warns analyst Wayne Cole in a Reuters story titled “Fill Up Your Car, Now.”
- The Strait of Hormuz: the “bottleneck” shaping global energy security – the explanations of a Romanian professor in the USA.
WTI crude rose by 31.4%, reaching a maximum of $119.48 per barrel on Monday, and Brent rose by 29%, reaching $119.50 per barrel, Reuters notes.
At press time, Brent was trading at over $107/barrel, up about 15% and on track for its biggest daily gain in history.
Before Monday's increases, Brent had already risen in price last week by 27%, and WTI by 35.6%.
Problems with tanker navigation have already slowed shipping activity and left Asian buyers dependent on Middle Eastern crude in a particularly vulnerable position as the crisis unfolds around the Strait of Hormuz, through which about a fifth of the world's oil passes.
Prices fell after the Financial Times reported that Group of Seven (G7) finance ministers and the International Energy Agency would discuss a coordinated release of emergency oil reserves on Monday, and Saudi Aramco offered crude through a series of tenders.
Problems in several Gulf states
“If the flow of oil through the Strait of Hormuz does not resume soon and regional tensions ease, upward pressure on prices is likely to persist,” said Vasu Menon, managing director of investment strategy at OCBC in Singapore.
Iraq and Kuwait have begun cutting oil production, following cuts in Qatar's liquefied natural gas output as the war has blocked shipping from the Middle East. Analysts expect the United Arab Emirates and Saudi Arabia to also be forced to cut production soon as they run out of places to hold oil stocks.
Refinery disruptions continued amid rising tensions in the region, with Bahrain's BAPCO announcing a state of force majeure following a recent attack on its refinery complex.
A fire also broke out in the Fujairah oil industrial area in the United Arab Emirates, as a result of some drone debris falling, with no casualties reported. Saudi Arabia's Ministry of Defense said it had intercepted a drone heading for the Shaybah oil field.
The Mojtaba Effect: Prices also rise because of the new ayatollah
Moreover, prices are being boosted by the announcement of the appointment of Mojtaba Khamenei to succeed his father Ali Khamenei as Iran's supreme leader, indicating that hardliners remain firmly in power in Tehran, a week after the conflict with the United States and Israel began.
“With the appointment of the former leader's son as Iran's new leader, US President Donald Trump's goal of regime change in Iran has become more difficult to achieve,” said Satoru Yoshida, commodities analyst at Rakuten Securities.
“This opinion has accelerated buying as Iran is expected to continue closing the Strait of Hormuz and attacks on other oil-producing countries' facilities, as seen last week,” he said, predicting that WTI could rise to $120 and then $130 a barrel in a relatively short period.
Weeks or even months of higher fuel prices
The war could leave consumers and businesses around the world facing weeks or months of higher fuel prices, even if the conflict that began last week ends quickly as producers grapple with damaged facilities, disrupted logistics and high shipping risks.
“The next signal will be if it eventually gets to a point where they have to start shutting down oil wells, which will not only hurt production further but also delay the response once the conflict subsides. This could keep prices high for a much longer period,” said Daniel Hynes, senior commodities strategist at ANZ.
Iraq's oil production from its main southern oil fields has fallen 70 percent to just 1.3 million barrels a day because it cannot export oil through the Strait of Hormuz because of the war with Iran, three industry sources said on Sunday. Crude oil stocks have reached maximum capacity, an official of the state-owned Basra Oil Company said.
Kuwait Petroleum Corporation also began cutting oil production on Saturday and declared force majeure for shipments, but did not specify how much production would be halted.
