Increased tensions between Israel and Iran are anticipated to push global crude oil prices higher, which could jeopardize the debt repayment strategy of the Oil Fuel Fund Office (Offo), according to an official from the Energy Ministry.
There is uncertainty regarding whether the United States will back potential Israeli attacks on Iran’s oil facilities in retaliation for missile strikes, raising concerns about fluctuations in oil prices, as reported by various media outlets.
In response to Israeli actions in Gaza and Lebanon, as well as the deaths of Hamas and Hezbollah leaders, Tehran launched at least 180 missiles targeted at Israel.
Should Israel proceed with its retaliatory measures, a significant rise in global crude oil prices appears unavoidable, the official, who wished to remain anonymous, indicated.
Crude oil futures saw an uptick after US President Joe Biden announced that Washington would engage in discussions with Israel regarding its conflict with Iran. On October 3, Brent crude oil prices rose by 4.8%, settling at $77.40 per barrel for November delivery, while West Texas Intermediate crude oil prices climbed by 5.1% to $73.60 per barrel.
Analysts from Citigroup, a leading multinational investment bank and financial services corporation, suggest that a substantial Israeli strike on Iran’s oil export capabilities could remove 1.5 million barrels of crude oil from the global market each day, thereby reducing the oil supply and escalating prices.
August saw Iran’s oil production hitting a six-year high of 3.7 million barrels per day. Research firm Clearview Energy Partners estimates that if Israel targets Iranian energy infrastructure, oil prices could rise by $13 per barrel. Additionally, if the Strait of Hormuz were to be closed, prices might surge by $28 per barrel.
These potential developments would adversely affect the already struggling financial situation of the debt-laden Oil Fuel Fund managed by Offo.
Previously, Offo officials had mentioned that they could potentially shorten the repayment timeline, aiming to clear all debts by 2028, following a decline in global oil prices from over $80 per barrel to just above $70 in August.
The government relies on this fund to manage domestic oil and gas prices. Rising global oil prices have resulted in higher subsidies, while falling prices allow authorities to collect more fees from oil consumers.
As of October 1, the fund has recorded losses totaling 99 billion baht. Given the likelihood of escalating conflicts in the Middle East, achieving the planned debt repayment may prove impossible for Offo, the official stated.
