Oil prices surged by 9.1% last week, the biggest increase in a week since March 2023 following escalation of tensions in the Middle East that have spurred jitters of looming supply disruptions.
In the Monday morning session, the global benchmark Brent Crude oil was trading at US$79.17 per barrel – a 1.13% daily gain. Kenya’s supplier UAE Murban opened the week at US$78.74 per barrel, a 1.28% daily gain from the previous close on Friday.
Additionally, WTI surged 1.41% to US$75.56 per barrel – all breaking above the USD 75.00/barrel mark.
Geopolitical Conflict in the Middle East
On Wednesday last week, Iran hit Israel with 180 ballistic missiles escalating tensions in the region.
Iran’s involvement in the war has threatened oil supply in the region amid oversupply lingering for the better part of 2024. This prompted fears in the global oil markets in the past week on account of a possibility of Israel targeting Iranian oil infrastructure which might provoke counterattacks.
On 7th October 2023, Hamas-led militants launched attacks on Israel, killing nearly 1,200 people. The attack was countered by Israel marking the beginning of the now one year old Israel – Hamas war. More than 41,000 people have since been reported dead from the war, borning a humanitarian crisis. Israel’s Prime Minister said earlier that the country faces war on seven fronts, naming Iran, Hezbollah and Hamas.
“The Israelis have not concluded what they’re going to do in terms of a strike — that’s under discussion,” Biden told reporters at a White House press briefing. “If I were in their shoes, I’d be thinking about other alternatives than striking oil fields.”
Since the onset exactly a year ago, oil prices have been little affected, ranging between a high of US$95.66 a barrel in October 2023 and US$68.69 a barrel low in September 2024.
In the last week of September, Saudi Arabia announced it was ready to give up its initial staunch oil price target of US$100 per barrel in preparation of unwinding its production cuts. The announcement coupled with Libya’s production and exploitation resumption pulled oil prices lower. Earlier, the Organisation of Petroleum Exporting Countries (OPEC) was bullish on growth in oil demand dating forward to 2050.
In Kenya, effects of global oil price increases and decreases lag on account of different landing cost prices, taxation and exchange rates used during the review cycles by the Energy and Petroleum Regulatory Authority (EPRA).
