Aug. 31 (UPI) — Oil prices surged early Monday after fighting flared in the U.S.-Iran conflict for the first time in four weeks since U.S. President Donald Trump announced a “pause” in U.S. military strikes on Aug. 1.
The contract for the benchmark Brent crude for November delivery jumped by 3.4% to $91.09 a barrel and the October contract for American crude saw a similar-sized increase to $86.22 after U.S. forces hit rocket launchers on Larak Island in the Hormuz Strait on Sunday night and Iran’s military retaliated, targeting American bases in Jordan.
The hikes were driven by the renewed hostilities stoking fears ongoing supply disruption caused by a drastic curtailment of tankers traffic transiting the Strait of Hormuz would be made worse and persist for longer, according to experts.
“Supply risk will persist and oil inventories will continue to deplete in the coming weeks and months. The Iranian crisis has likely changed the security status quo in the Middle East,” said PVM Oil Associates’ London-based analyst Tamas Varga.
Investment bank Goldman Sachs, the impact of destructive attacks on refining capacity was responsible for upward pressure on margins.
“Rising strikes on refineries in the Middle East and Russia have further constrained already-stretched global refining capacity, pushing refined products margins to new highs,” the bank said in a note.
Prices at the pump in the United States on Monday remained broadly flat from the previous day, with the average price of a gallon of regular unleaded up 0.2 cents at 4.08 a gallon, and diesel down by a little over 0.3 cents at $5.60 a gallon, according to the American Automobile Association.
The developments came as the United States’ Strategic Petroleum Reserve has fallen to its lowest level since 1982.
President Trump said Sunday he would restock it with oil from his Venezuela deal giving the United States secure a stake in more than 65 billion barrels of oil despite the fact it could to produce take many years to before the agreements yields any significant volumes because the oil is reserves, as yet to be drilled.
The price of oil has seesawed over the past two weeks after rising in response to Trump’s Aug. 19 threat to wage a “crushing economic operation” against Iran that his officials said would cause the regime to collapse, and then retreating again in the hours before the mainly-sanctions package of measures were unveiled on Aug. 24.
