Oil prices climbed above $106 per barrel in late Sunday trading as investors reacted to growing concerns that the conflict involving Iran could further disrupt global oil supply.
Brent crude futures rose as high as $106.50 per barrel before pulling back to about $103.93 later in the evening. The move followed another volatile week for oil, with prices swinging sharply as traders weighed the risk of supply disruptions in the Middle East.
The latest rally came even after the International Energy Agency announced a record release of 400 million barrels from strategic reserves. The United States is expected to contribute 172 million barrels.
Analysts said the market is still focused on the risk to oil flows through the Strait of Hormuz, a key shipping route for global energy supplies.
“Why is the market rallying despite this large release? First, there are no signs of de-escalation in the Persian Gulf, so there is no end in sight to the disruptions to oil flows through the Strait of Hormuz,” ING Bank said in a March 12 statement.
Concerns have also grown after Iran threatened to retaliate if its oil and energy infrastructure is targeted. Those threats, along with recent attacks in the region, have kept pressure on oil markets.
ING said the reserve release may not be enough to make up for losses if the conflict continues to affect supply. The bank added that oil prices are unlikely to move lower in a sustained way unless energy shipments through the Strait of Hormuz can continue freely.
The price surge is already being felt by consumers. According to AAA, the national average price for regular gasoline in the United States rose to $3.69 per gallon on Sunday, up from $3.45 a week earlier.