Business

Heating Oil Prices Surge Amid Ongoing Tensions in the Middle East

Kathy Adams 4 days ago 3 min read

The initial shockwaves from Israel’s attack on Iran appear to have been absorbed by the markets, with the momentum of the oil price surge slowing notably. Still, crude oil prices climbed again over the weekend. A barrel of oil now trades around $75, marking an increase of approximately $9 since last Thursday. In Germany and Austria, consumers are seeing heating oil prices rise by about two euro cents per liter compared to Friday, bringing the total crisis-related markup to between six and eight cents per liter. Interestingly, heating oil prices in Switzerland dipped slightly on Monday morning, bucking the trend. Despite rising prices, demand for heating oil remains high, with market expectations closely tied to developments in the Middle East. For now, markets seem to have priced in the current level of escalation.

The euro opened Monday trading at $1.15, showing a moderate upward trend while oil prices began to decline. Brent crude from the North Sea is currently trading at $73 per barrel, and U.S. WTI crude is at $72. Meanwhile, ICE Gasoil just barely climbed back to the psychologically significant $700-per-ton mark.

Over the weekend, fighting between Israel and Iran intensified. On Friday, Israel launched an attack on Iran, triggering a rapid rise in global oil prices. Israel considers Iran’s nuclear program a significant threat, citing past threats from Tehran of total destruction. The exchanges of fire continued throughout the weekend, resulting in numerous civilian casualties on both sides. Among the targets of Israel’s strikes was Iranian oil infrastructure. Iran produces approximately 3.3 million barrels per day of crude oil and exports about 2 million barrels per day, primarily to China. If Iran’s exports are disrupted, China may be forced to source oil elsewhere on the global market.

However, the greater concern for global oil markets lies in Iran’s control of the Strait of Hormuz, a critical maritime chokepoint through which roughly 20% of the world’s oil supply passes daily. A potential blockade of the strait by Iran could send oil prices soaring.

Amid escalating military conflict, Iran canceled ongoing nuclear deal negotiations with the United States, stating that talks would resume only after Israeli attacks cease. The U.S., for its part, has declared its support for Israel’s defense but stressed it does not plan to attack Iran. Washington also warned of severe retaliation should Iran target American personnel or assets.

The rise in oil prices has had a dramatic effect on consumer behavior. By Monday morning, heating oil demand had more than doubled compared to the same period last year. On HeizOel24, a platform for comparing heating oil offers, the number of users seeking deals was over six times the seasonal average.

On average, heating oil prices on Monday morning rose by 2.0 cents per liter in Germany and 2.9 cents in Austria, while in Switzerland, prices dropped by about 2.3 rappen per liter. Heating oil buyers are advised to keep a close watch on prices throughout the day.

Some market experts believe the risks from the Middle East conflict have already been factored in and that oil prices may have peaked for now. This sentiment is prompting some traders to offload their positions, viewing the current premiums as exaggerated. Still, should Iran choose to blockade the Strait of Hormuz, further price hikes would likely follow.