Crude oil may get a few more pops from a widening Middle East war but a surge to the highs seen after a Russian invasion of Ukraine in 2022 is highly unlikely given supplies will surpass demand for the liquid needed to run power plants and transport, analysts said.
Global benchmark Brent was trading at US$80.70 per barrel on Oct 8, up 16.6 per cent from a two-year low of US$69.19 in September, amid the latest escalation of the year-long conflict in the Middle East - a region that accounts for about a third of the world's oil production.
Crude prices jumped after Iran launched its second salvo of missiles at Israel in retaliation for the assassination of Hassan Nasrallah, the chief of Lebanese militia Hezbollah. Israel has vowed to launch its own reprisal which some observers believe may include the Islamic Republic's oil infrastructure.
A prolonged disruption of supplies from Iran, most of which are headed to China, will be unwelcome news for not just buyers but also for central banks and consumers worldwide. Oil's decline from highs of around US$124 per barrel in the wake of the Ukraine war has played a key role in bringing inflation down from its peak.
For Singapore, gasoline and diesel, extracted from crude, still form the bulk of its transport fuel. While natural gas is the primary source of electricity generation here, its price is benchmarked to oil. Even otherwise, since transport and power are significant components of everything consumed, import prices - a key source of the Republic's inflation - will start to rise if oil spikes.
While it is nearly impossible to know what happens next in the Middle East, the global oil market's supply and demand situation - including the impact of possible disruptions - is quite clear and gives hope that prices will not rise too much and, in fact, will fall next year.
Denne historien er fra October 09, 2024-utgaven av The Straits Times.
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Denne historien er fra October 09, 2024-utgaven av The Straits Times.
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