World oil prices surged 20%, reaching their highest level since July 2022.
Brent and WTI oil prices surged simultaneously due to concerns about supply disruptions from the Middle East and depleted storage capacity, forcing countries to cut production.
World oil prices recorded a record surge on Monday (March 9), reaching their highest level in nearly four years. Escalating tensions in the Middle East fueled a nearly 20% increase in Brent crude, while WTI crude at one point surged over 22% due to concerns about prolonged disruptions to shipping through the Strait of Hormuz.
High volatility on energy exchanges.
Specifically, Brent crude oil prices rose by $18.35, or 19.8%, to $111.04 per barrel. Earlier in the session, it had also seen a $15.24 increase to $107.93 per barrel. Similarly, West Texas Intermediate (WTI) crude oil prices increased by $16.50, or 18.2%, closing at $107.40 per barrel, after peaking at $111.24 per barrel earlier in the trading session.
This surge continues the strong upward trend of last week, when Brent crude prices rose 27% and WTI increased 35.6%. The main reason identified is the conflict between the US, Israel, and Iran, which has forced major oil producers in the Middle East to cut supply in response to transportation security concerns.
Middle Eastern countries are simultaneously cutting production.
In Iraq, oil production from major southern fields has plummeted by 70%, to just 1.3 million barrels per day. According to industry sources, the country is unable to export oil through the Strait of Hormuz due to the conflict. An official at Basra Oil Company stated that crude oil storage facilities there are now at maximum capacity.
Meanwhile, Kuwait Petroleum Corporation (KPC) began cutting production on Saturday and declared force majeure on shipments. Earlier, Qatar had also implemented measures to reduce liquefied natural gas (LNG) production to adapt to the new market conditions.
Market analysis and forecasting
Daniel Hynes, senior commodities strategist at ANZ, noted that this morning's price surge stemmed from reports of rapidly filling warehouses in the Middle East. This forced producers to proactively reduce output to avoid overloading storage infrastructure.
"The next sign to watch is whether producers will have to shut down oil wells. This would not only affect current production but also make it difficult to restore supply once the conflict subsides, potentially maintaining high prices for a longer period," Hynes further analyzed. Experts predict that the UAE and Saudi Arabia may also soon face pressure to cut production.
