JAKARTA - Oil prices strengthened again on Wednesday, March 11. The market is still volatile. In the midst of the US-Israeli war against Iran, market participants doubt the plan to release emergency oil reserves by the International Energy Agency or IEA is able to close the threat of supply disruptions from the Gulf region.
Reuters on Wednesday, March 11 reported that the Brent contract rose 59 cents or 0.7 percent to $88.39 a barrel by 0727 GMT. Meanwhile, U.S. West Texas Intermediate (WTI) crude rose 98 cents or 1.2 percent to $84.43 a barrel. This increase occurred after both contracts continued to weaken at the start of Asian trading, a day after prices fell more than 11 percent.
The market is indeed seeing efforts to calm the situation. The Wall Street Journal reported that the IEA is preparing to release oil reserves in an amount that is even said to exceed 182 million barrels, larger than the two stages of stock releases in 2022 when Russia invaded Ukraine. However, the market apparently is not easy to convince.
chs, still from Reuters, assessed that the release of such a large stock was only enough to cover the disruption of Gulf exports for 12 days, assuming that supplies were disrupted by 15.4 million barrels per day. This means that emergency reserves are not necessarily able to withstand a crisis if the war drags on.
Market pressure is getting stronger after the US and Israel attacked Iran in an attack that was called the most intense since the war broke out. The US military also admitted to crippling 16 Iranian minesweeping vessels near the Strait of Hormuz. But the risks on the vital route have not receded. Reuters reported that the US Navy even rejected the request of the shipping industry for military escort because the threat of attack was still too high.
The supply disruption continues to widen. ADNOC closed the Ruwais refinery after a fire due to a drone attack. Saudi Arabia began to increase supplies via the Red Sea, but it was not enough to close the decline in flows from the Strait of Hormuz. Wood Mackenzie estimates that the war has cut oil and oil product supplies from the Gulf by about 15 million barrels per day. If the crisis worsens, oil prices could soar to US$150 per barrel.
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