Saturday, March 2, 2024

Global oil prices may double: Report

Global prices for crude oil will double if disruptions triggered by Yemen’s Houthis also affect the Strait of Hormuz, Daan Struyven, Goldman Sachs’ head of oil research, has told CNBC in an interview.

The Houthis have staged a de facto blockade of shipping through the Red Sea and continued to attack cargoes following the escalation of hostilities between Israel and Hamas in Gaza. The Yemen-based fighters target vessels thought to be linked to Israel, which they say is in solidarity with the plight of the Palestinians.

“If you’ve got a disruption of the Strait of Hormuz for a month, prices would rise by 20%,” Struyven said, adding that prolonged interference in the strait could eventually double oil prices.

Despite viewing the scenario as “highly unlikely”, Struyven joins a wide range of analysts from across the entire energy sector decrying the situation in recent weeks.

The increasing attacks have forced global shipping companies to divert vessels from the Red Sea around the Cape of Good Hope, at the southern tip of Africa. For cargos travelling from Asia to Europe or North America, that course adds around 6,000 nautical miles to the journey and can delay delivery times by up to a month, inevitably sending shipping costs soaring.

The Houthi strikes have been continuing for weeks, and threaten to significantly disrupt the flow of commercial goods through the Red Sea and Suez Canal, an important artery for trade between Asia and Western countries. The militants have launched missiles at least two dozen times since December 19 in response to the Israel-Hamas war.

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