Latest international oil price projections point to a potential Rs. 1,000-per-litre petrol scenario if US/Israel-induced tensions around the Strait of Hormuz stay active beyond 2026.
Oil prices could surge to $200 per barrel if oil shipments through the Gulf of Oman and the Strait of Hormuz face further disruptions, Russell Hardy, chief executive of Vitol Group, said at an energy forum in London this week.
“Oil is currently trading at around $103 per barrel, while petrol costs around Rs. 400 per litre in Pakistan. If oil prices hit $200 per barrel and the IMF forces Pakistan to end all subsidies, petrol will certainly cross Rs. 1,000 per litre and wreak havoc beyond 2026”, an independent energy market analyst based in Karachi told ProPakistani in response to queries about Vitol’s forecast.
Speaking at the Energy Intelligence Forum in London this week, Hardy said ship-to-ship oil transfers in the region remain critical to maintaining supplies from Gulf producers. We believe this is an important factor for determining raw oil prices at the supply stage.
“Without it, you do have that $200-a-barrel scenario, so it is pretty important it continues,” the analyst said, warning that top suppliers’ inventories have little remaining capacity and Vitol projections are not far-fetched.
Ship-to-ship transfers involve smaller vessels carrying oil through the Strait of Hormuz before transferring their cargo to larger tankers in the Gulf of Oman.
Tracking resources operating out of Oman and Bahrain reported that around 14 million barrels per day of oil and petroleum products had left the Middle East over the previous 10 days. This included 12 million barrels per day of crude oil and 2 million barrels per day of refined products.
Although these flows remain below pre-war levels, continuing them is essential to preventing the $200 per barrel scenario.
But growing attacks on vessels and the US blockade threaten these shipments. At least 12 attacks involving oil, liquefied natural gas and liquefied petroleum gas tankers were reported around the Strait of Hormuz in the week ending October 5, according to Reuters.
The Bab Al-Mandeb strait is the next route affecting oil prices.
In concluding remarks, the analyst mentioned that the risk premium for transporting energy blocks across the straits have skyrocketed. Some tankers are earning at least $500,000 per day while Saudi export shipping costs to Europe have soared close to $40 per barrel.
Any further deterioration in shipping conditions could trap more oil in the region, reduce global supplies and increase upward pressure on prices everywhere.
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