Oil Prices Jump Following Attack on Iranian Gas Field

Brent crude prices spiked on March 18 following reports of strikes on Iran’s South Pars gas field.

Brent crude prices jumped to $109.80 a barrel shortly after the opening bell of the U.S. stock market, following a morning on which Brent futures fluctuated between $100 and $107 a barrel.

Iranian state TV said airstrikes hit South Pars and also oil and petrochemical facilities in nearby Asaluyeh.

With no signs of de-escalation in the conflict, benchmark Brent futures prices have remained above $100 per barrel for the past four trading sessions. The rise to more than $109 a barrel comes after a 3 percent rise on March 17.

The attack on energy assets in Iran is the latest event to disrupt the global oil supply.

Brent crude has risen by about 80 percent this year, partly because of the halt of traffic through the Strait of Hormuz. The sea passage from the Persian Gulf to the open ocean handles about a fifth of the world’s oil and liquefied natural gas.

Markets went red in the early hours of trading, partly because of data released by the Bureau of Labor Statistics showing that U.S. producer prices rose about twice as fast in February as had been expected. The producer price index tracks inflation from the producer’s perspective and reflects the average change in selling prices for domestic goods and services.

The Dow dropped more than 400 points, and the tech-heavy Nasdaq was down more than 150 points, in early trading on March 18.

The price jump came as the Federal Reserve is expected to hold interest rates steady for the second straight time this year.

Still in question is how the Federal Open Market Committee will evaluate the effects of the Iran oil price shock on inflation and the economy, which in turn could affect the outlook for setting interest rates. The Committee is the Federal Reserve’s monetary policymaking body.

In recent weeks, Fed officials have said the Iran conflict raises uncertainty. That could lead to a delay in considering rate cuts for later in the year.

Also on March 18, President Donald Trump issued a 60-day waiver to lower shipping costs and promote the flow of fuel supplies. The Jones Act waiver allows foreign-flagged ships to transport goods between U.S. ports and will apply to commodities including crude oil, gas, refined fuel, coal, and fertilizer.

In other major developments on March 18, U.S. companies will be permitted to conduct business with Venezuela’s state-owned oil company because of easing of sanctions by the U.S. Treasury Department. Petróleos de Venezuela S.A. will now be allowed to sell the nation’s oil to U.S. companies and global markets, a reversal in U.S. policy that had blocked dealings with the South American country’s oil sector for years.

“Under President Trump’s leadership, the United States is working in partnership with the government of Venezuela to reopen and restore Venezuela’s energy sector,” a spokesperson at the Treasury told The Epoch Times.

“Today, the Treasury Department’s Office of Foreign Assets Control issued a license broadly authorizing established U.S. entities to engage in many types of transactions with Venezuela’s state-owned oil company, Petróleos de Venezuela, S.A., and its subsidiaries. This license will benefit both the United States and Venezuela, while supporting the global energy market by increasing the supply of available oil. It will also help incentivize new investment in Venezuela’s energy sector.”