Qatar energy minister, Saad al-Kaabi, has warned that global oil price may reach $150 per barrel within weeks, as there are expectations that all Gulf energy producers may shut down exports.
Kaabi made the forecast on Friday in an interview with the Financial Times, citing the ongoing Middle East tensions as the United States-Israeli war against Iran rages.
The minister said even if the war ended immediately, it would still take Qatar “weeks to months” to return to a normal cycle of deliveries following an Iranian drone strike at its largest liquefied natural gas plant.
What the energy minister is saying
The minister forecast that crude prices could soar to $150 a barrel in two to three weeks if tankers and other merchant vessels were unable to pass through the Strait of Hormuz, a key maritime trade route through which a fifth of the world’s oil and gas passes.
- “Everybody that has not called for force majeure we expect will do so in the next few days if this continues. All exporters in the Gulf region will have to call force majeure.
- “If they don’t, they are at some point going to pay the liability for that legally, and that’s their choice.
- “This will bring down the economies of the world. If this war continues for a few weeks, GDP growth around the world will be impacted. Everybody’s energy price is going to go higher. There will be shortages of some products and there will be a chain reaction of factories that cannot supply.”
- “We don’t yet know the extent of the damage, as it is currently still being assessed. It is not clear yet how long it will take to repair,” he said.
More insights
While US President Donald Trump said earlier this week that the US navy would escort ships through the strait and had offered to provide additional insurance to shipping companies, Kaabi said it would still be unsafe for vessels to pass through the strait if the war continued.
- “The way that we are seeing the attacks, bringing ships into the strait. It’s too dangerous. It’s too close to the shore to bring ships in. It will be difficult to convince ships to go in.
- “Most of the ship owners will see that they become a bigger target because they’re [Iran] targeting the military ships.
- “In addition to energy, there will be a halt on all other trade in between the [Gulf] and the world, which will have a significant effect on the economies of the [Gulf] and all the trading partners around the world,” Kaabi said.
What you should know
Qatar is one of the world’s second-largest producers of LNG, and it was forced to declare force majeure this week after the strike at its Ras Laffan plant.
- This came after the energy firm announced that it was shutting downstream productions, just a day after it stopped LNG production due to the escalating Middle East tensions.
- The US-Israeli war against Iran has wreaked havoc across the oil-rich Middle East region.
- Brent crude rose 2.5 per cent to $87.6 a barrel on Friday morning in Europe, the highest level since the start of the conflict.
The development has had ripple effects across economies of different countries including Nigeria, which has seen recent hike in Premium Motor Spirit pump prices.
