OIL prices may surge to as high as $150 per barrel within two to three weeks if tanker traffic through the Strait of Hormuz remains blocked, Qatar’s Energy Minister, Mr Saad al-Kaabi, said in an interview with the Financial Times published Friday.
The warning came shortly before reports emerged that Kuwait, a founding member of the Organization of the Petroleum Exporting Countries (OPEC), had begun shutting down production at several oilfields. Sources familiar with the development said storage facilities are filling up rapidly because crude shipments cannot move through the Strait of Hormuz, Oilprice.com reported.
Officials in Kuwait are also considering deeper output cuts and scaling down refining activity to levels that would meet only domestic demand, according to the sources. The exact scale of the production shutdown has not yet been disclosed.
Al-Kaabi, who also serves as chief executive of QatarEnergy, said major oil and gas exporters across the Middle East may soon declare force majeure on exports if the key shipping route remains effectively closed to tanker traffic.
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Earlier in the week, Qatar’s state energy company halted liquefied natural gas production at its Ras Laffan Industrial City, the world’s largest LNG hub, following a drone attack on the facility and the sharp drop in tanker movement through the Strait of Hormuz. The company later issued force majeure notices to buyers.
Data from the Joint Maritime Information Center showed vessel traffic through the Strait has collapsed from an average of 138 ships daily to just two vessels in the 24 hours to Thursday, none of which were oil tankers.
Dozens of tankers are currently stranded near the strait, with some reportedly targeted in attacks. The situation has been worsened by insurers withdrawing war-risk coverage, effectively paralysing energy shipments from the world’s largest oil-producing region. A pledge by United States federal government authorities to provide insurance support has so far failed to restore traffic.
“Everyone who hasn’t declared force majeure is likely to do so within the next few days if this situation continues,” al-Kaabi told the Financial Times, adding that exporters across the Gulf region would be forced to suspend deliveries.
He also cautioned that a prolonged conflict lasting several weeks would weigh heavily on global economic growth.
Even if hostilities were to end immediately, he noted that it could take weeks or even months before energy exports return to normal schedules.
