Oil exceeds $110 per barrel after discovery of gas field
Rachel ClunEconomic journalist
Oil price surged above $110 (£82.78) a barrel after Iranian media reported that an airstrike had hit a facility on the world’s largest natural gas field.
Benchmark Brent crude oil hit $112 a barrel early Thursday in Asia, more than 5% higher than Tuesday’s prices. The price has since fallen slightly.
The UK’s benchmark gas price also jumped 6% to 143.53 pa thermal before falling back to around the 140p mark.
The increase follows reports that Iran’s South Pars gas field petrochemical complex was hit. A few hours later, Qatar reported that the Ras Laffan industrial site had suffered “significant damage” following threats from Iran.
Although oil and gas prices have soared, they have remained below the peaks seen at the start of the conflict.
Oil reached $116.78 per barrel on March 9, while British gas hit 162.55 thermal pa on March 3.
Iran’s Oil Ministry said a fire at the petrochemical complex was under control, according to Tasnim, a news agency affiliated with the Islamic Revolutionary Guard Corps.
Iran’s military has warned it will take “decisive action” in response to the attack on its energy infrastructure.
“As we previously warned, if our country’s oil, energy, gas and economic infrastructure is attacked by the US-Zionist enemy, in addition to a powerful counterattack against the enemy, we will also severely strike the origin of this aggression,” the army said in a statement released by Tasnim.
“We consider it legitimate to target the fuel, energy and gas infrastructure of the countries of origin and we will respond vigorously as soon as possible.”
Qatar also operates facilities at the gas field, which it calls North Dome.
But the country, which produces a fifth of the world’s liquefied natural gas, halted production in early March in response to the conflict.
Qatari Foreign Ministry spokesperson Majed Al Ansari said the strikes on energy infrastructure “pose a threat to global energy security.”
Shortly after 18:15 GMT, the Qatari Interior Ministry said it was responding to “a fire in the Ras Laffan area following Iranian targeting.” Qatari oil company QatarEnergy later said the site had suffered “significant damage”.
The Interior Ministry said shortly after 1900 GMT that it had “initially brought the fire in Ras Laffan under control, without causing any injuries”.
Ras Laffan was among sites listed by Iran in a warning that it would take “decisive action” after its facilities at the South Pars gas field were reportedly hit by Israeli strikes.
“Energy markets likely to remain volatile”
Danni Hewson, head of financial analysis at AJ Bell, said the attack and Iran’s retaliation had “helped to raise the temperature once again and put further upward pressure on oil prices”.
“Any solution to the blocked Strait of Hormuz seems quite distant at this point and until there is progress on this front, energy markets are likely to remain volatile,” she added.
The White House responded Wednesday to rising oil prices by announcing it was suspending the Jones Act, a 1920 law that mandates that only U.S.-made ships can be used to transport goods between U.S. ports.
U.S. Press Secretary Karoline Leavitt said the 60-day waiver to the rules, which are aimed at boosting shipbuilding, will allow “vital resources like oil, natural gas, fertilizer and coal to flow freely” since non-U.S.-made ships can now be used.
However, shipping groups in the United States said the effect would be minimal, pointing out that oil prices, not transportation costs, are behind the rise in pump prices.
At the same time, Iran also suspended the flow of gas to Iraq to bolster its domestic supplies, a senior Iraqi official told Reuters.
The vast majority of Iran’s gas supply – 94% – is used domestically, according to data from the Gas Exporting Countries Forum.