NEW YORK (AP) — The price of oil surpassed $100 a barrel for the first time in almost six weeks after attacks on oil facilities and ships in the Middle East threatened to debilitate an already weakened supply chain.
The most heavily traded contract for a barrel of Brent crude, the international standard, settled at $97.89 before jumping 2.4% to $100.29 early Wednesday.
U.S. benchmark crude gained 1.9% to $94.77 a barrel.
When oil prices spike, prices of
gasoline, diesel and jet fuel also rise. That can increase the cost of traveling and of goods that must be transported quickly like fresh food or shipped long distances like furniture and appliances.
Markets reacted after the U.S. military reported striking five Iranian tankers in response to attempted missile attacks on a Navy warship and after attacks by an Iranian-backed Houthi rebel group ignited fires at oil facilities in Saudi Arabia.
Crude oil prices shot up after Israel and the United States initiated a war with Iran, and they have fluctuated a great deal during the more than six months since then. The fighting has halted most shipping through the Strait of Hormuz, a narrow waterway through which a fifth of the world’s oil supply passed before the war began.
Brent increased from about $70 to $100 a barrel for much of March, April and May. In July, prices swung between $72 and $102 again, reflecting rising and falling hopes that the U.S. and Iran would agree on a plan that would allow stranded tankers to move oil out of the Persian Gulf safely.
“In our view, reaching a durable deal before the U.S. midterm elections is increasingly unlikely, and it could remain elusive even beyond that,” Bank of America analysts said in a Tuesday research note.
The analysts increased their oil price forecast for the second half of the year to $83 a barrel “in light of more persistent disruptions to Hormuz,” but said they still expected shipping through the strait to gradually pick up. If attacks keep a chokehold on traffic, prices could reach $95-$120 a barrel, while damage to major energy infrastructure could produce spikes of up to $150 a barrel, the analysts wrote.
Negotiations over a preliminary deal between the U.S. and Iran to end the conflict broke down over control of the Strait of Hormuz. Iran insists it has the right to set the terms and charge fees for ships traveling through the waterway off its coast. The U.S. wants passage to remain free, and has used a Navy blockade to block Iran’s ports and oil tankers.
Recent stepped-up attacks by Yemen’s Houthis could constrain global oil supplies even more because they targeted an alternative shipping route that Saudi Arabia has relied on to transport oil during the war.
Higher energy costs have weighed on consumers, businesses and economies around the world this year, more so outside of the U.S. Refinery outages in Russia, reduced refining activity elsewhere, and sharply declining inventories have pushed diesel and gasoline prices toward record highs, according to a research note Monday from Bank of America.
The effects on American consumers still are a concern for President Donald Trump and the Republican Party as November midterm elections approach.
A gallon of regular gasoline averaged $4.15 in the U.S. on Tuesday, up 26% from a year ago, according to motor club AAA. Diesel, at $5.90 a gallon, cost 59% more than the same day a year earlier.
Elevated oil prices also pushed up the cost of jet fuel, one of the global airline industry’s largest expenses. U.S. and international carriers have responded by cutting flights and raising fares and fees.
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AP Business Writer Rio Yamat contributed from Las Vegas.
