(Corrects to read ‘last year’ (not ‘this year’), paragraph 11)
March 9 (Reuters) – Saudi Arabia has begun oil output cuts, sources said on Monday, becoming the latest Gulf producer impacted by the U.S. and Israeli war on Iran which has halted ship traffic in the region and sent oil prices up nearly 30% to $119 a barrel on Monday.
Adding to market jitters were Tehran’s hardline succession plans which cooled hopes of a quick end to hostilities.
Saudi oil giant Aramco has begun cutting output at two of its oilfields, two sources said, but did not provide further detail. The company declined to comment.
In Bahrain, Bapco Energies declared force majeure following an attack on its refinery complex, the company said.
Over the weekend Iraq cut output at its main southern oilfields by 70% to 1.3 million barrels per day (bpd), three industry sources said, while Kuwait Petroleum Corp began cutting output on Saturday and declared force majeure.
Oil prices hit their highest since mid-2022, surging at one point by some 30%. Benchmark Brent crude futures were up 12% at $103.93 per barrel at 1156 GMT and U.S. West Texas Intermediate (WTI) up 12.5% at $102.31.
“Oil prices have now gathered all the ingredients for a perfect storm – Middle East Gulf producers cutting output, the prolonged closure of the Strait of Hormuz … all compounded by a growing pessimism about a quick turnaround in the current situation,” said Kpler senior oil analyst Muyu Xu.
Saudi Arabia is diverting crude exports by pipeline to the Red Sea while Iranian threats of attack keep traffic into and out of the Gulf at an almost complete standstill.
Hundreds of tankers sit idle inside the Gulf and just outside its southern Strait of Hormuz.
EMERGENCY OIL RESERVES RELEASE
A Group of Seven meeting of finance ministers on Monday will discuss the possibility of a joint release of emergency oil reserves, a French government source said.
U.S. President Donald Trump, who returned to power last year pledging to deliver cheaper energy costs for Americans, tried to downplay concerns about rising U.S. gasoline prices, which were up 11% on the week on Friday.
Senate Minority Leader Chuck Schumer called on the president to sell oil from the Strategic Petroleum Reserve.
Japan, which imports around 95% of its oil from the Middle East, has instructed a national oil reserve storage site to prepare for a possible crude release, a senior member of parliament said on Sunday, though the chief cabinet secretary later said no decision had been made.
Governments are wary of the inflationary impact of soaring energy costs, with President Lee Jae Myung announcing South Korea’s first price caps on fuel in nearly 30 years.
Elsewhere, Vietnam removed import tariffs on fuels and Bangladesh shut universities to conserve electricity and fuel.
China has asked refiners to halt fuel exports and to try to cancel shipments that were already committed.
Qatar, the world’s second largest exporter of liquefied natural gas, has also halted exports.
Even if the U.S. places warships in the Strait of Hormuz to defend shipping, the route would remain “too dangerous”, Qatar’s Energy Minister Saad al-Kaabi told the Financial Times in an interview published on March 6.
(Reporting by Shadia Nasralla, Enes Tunagur, Yousef Saba, Shubham Kalia, Dominique Vidalon, Makini Brice, Joyce Lee, Kyu-seok Shim; writing by Tony Munroe; editing by Thomas Derpinghaus and Jason Neely)
Comments