By Shadia Nasralla
LONDON, March 9 (Reuters) – Oil prices rose above $119 a barrel on Monday, reaching levels not seen since mid-2022, as some major producers cut supplies and fears of a prolonged shipping disruption gripped the market due to the escalating U.S.-Israel war with Iran.
Brent crude futures were up $8.77, or 9.46%, at $101.46 a barrel by 1339 GMT, while U.S. West Texas Intermediate (WTI) crude futures were up $7.92, or 8.71%, at $98.82.
In a violent session, Brent had earlier hit a high of $119.50 a barrel, indicating its biggest absolute price jump in a single day, and WTI hit $119.48 a barrel.
Brent is up as much as 66% and WTI is up 77% since their last close before the US and Israel launched attacks on February 28.
Monday’s prices compare with record highs of around $147 a barrel for contracts in 2008, according to LSEG data dating back to the 1980s.
THE MARKET STRUCTURE INDICATES AN INTENSE SHORTAGE OF SUPPLY
The premium for first-month Brent freight contracts over contracts for delivery within six months rose to a record high on Monday of nearly $36, according to LSEG data dating back to 2004.
That figure was well above its previous peak of around $23 in March 2022, in the early weeks of the Russia-Ukraine war.
This premium indicates a market structure known as forwardation, which shows that traders see an intense shortage of current supply.
The Strait of Hormuz, through which about a fifth of the world’s oil and liquefied natural gas normally passes, is virtually closed.
Also boosting prices is the appointment of Mojtaba Khamenei to succeed his father Ali Khamenei as Iran’s supreme leader, signaling that hardliners remain firmly in charge in Tehran a week into its conflict with the United States and Israel.
The war could leave consumers and businesses around the world facing weeks or months of higher fuel prices even if the conflict ends quickly, while suppliers grapple with damaged facilities, disrupted logistics and heightened risks to shipping.
U.S. gasoline contracts hit their highest level since 2022, around $3.22 a gallon, as U.S. President Donald Trump told American consumers the impact on their cost of living would be limited ahead of the midterm elections in November.
“Alternatives are limited, such as tapping strategic oil reserves, but compared to the potential magnitude of supply disruption if the Strait remains closed for longer, they are a drop in the ocean,” said UBS analyst Giovanni Staunovo.
US Senate Democratic leader Chuck Schumer has called on Trump to release strategic oil reserves, and a French government source said on Monday that Group of Seven nations would also discuss this.