Further spikes in Singapore petrol, power prices loom with oil topping US$100

[SINGAPORE] A new escalation in the Middle East conflict now hitting the region’s oil infrastructure makes it likely that consumers and businesses in Singapore will soon see petrol prices rise again after a round of hikes last week.

Electricity prices, which depend heavily on natural gas, may also go up if Middle East supplies remain disrupted for longer.

The expanding conflict is now seeing oil and liquefied natural gas (LNG) facilities in Bahrain, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates (UAE) targeted in attacks by Iran, while Israel has struck critical oil facilities in Teheran.

While the closure of the Strait of Hormuz has already disrupted the transport of oil, it would be quick to reverse once reopened. But the damage to the region’s oil infrastructure means it would take much longer for production and exports to resume even after the missile and drone strikes stop.

The attacks sent the global oil benchmark Brent crude spiking as much as 29 per cent to US$119.50 a barrel on Mar 9, from its close on Mar 6. It later pared gains – but was still trading 17 per cent higher – following a media report that the Group of Seven finance ministers will discuss a possible joint release of oil from reserves coordinated with the International Energy Agency.

Analysts said the oil production cuts were expected as most producers in the region were signalling that they were running out of capacity to store the unshipped output.

The UAE’s Abu Dhabi National Oil Company said on Mar 7 that it has “activated its well-established protocols and is working closely with the relevant authorities to protect its people, assets, and operations”.

Kuwait Petroleum Corp said it was lowering production at both its oil fields and refineries after “Iranian threats against safe passage of ships through the Strait of Hormuz”.

Bloomberg News reported on Mar 8 that Iraq’s oil production has declined by roughly 60 per cent.

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There is also a continued physical threat to tankers plying the Persian Gulf.

Since the start of hostilities on Feb 28, Britain’s maritime security agency UKMTO has issued around 10 alerts for attacks on vessels in Hormuz – a narrow waterway connecting the Persian Gulf to the Indian Ocean that handles a fifth of the world’s oil and large volumes of LNG.

The International Maritime Organization listed on its website on Mar 6 a total of nine attacks on ships in the strait in one week, including four incidents that killed a total of seven people.

The Strait of Hormuz is just around 38km wide at its narrowest point and traces the coastline of Iran, which is facing a joint air campaign by the United States and Israel.

Iran on its part has retaliated with missile and drone attacks on Israel and Arab states across the Middle East that host American military facilities.

The oil production cuts come on top of the force majeure declared by Qatar, one of the world’s top LNG exporters and a key supplier for Singapore, after a strike last week on its Ras Laffan plant – which cools and compresses natural gas into liquid that can be shipped.

Some 15 million barrels of crude oil and 290 million cubic m of LNG pass through Hormuz each day from the Middle East to mainly Asia and Europe.

Analysts said oil supplies from the Middle East – which account for roughly 40 per cent of all global crude exports – may remain constrained or even dwindle further as tankers plying the region are running out of marine fuel, which typically comes via Hormuz as well.

But for petrol and diesel prices in Singapore and the rest of Asia, the more immediate impact is coming from China – the region’s third-biggest petrol supplier – which on Mar 5 told the country’s top refiners to temporarily suspend exports immediately, with some exceptions.

Petrol prices in Singapore are fixed by retailers daily, taking the Mean of Platts Singapore (MOPS) average of daily price assessments published by S&P Global Platts.

While S&P MOPS assessments are not made public, analysts said they had been volatile and skewed to the upside through most of last week.

Pump prices in Singapore have already crossed S$3 per litre last week and are expected to test the S$4 level last seen for the premium octane 98 grade in early June 2022.

US investment bank Goldman Sachs estimates that even if the two pipelines that evade Hormuz – the East-West pipeline from Saudi Arabia that terminates in the Red Sea and the Fujairah pipeline from the UAE ending in the Gulf of Oman – operate at full capacity, there would still be roughly 16 million to 17 million barrels per day of supply at risk.

Daan Struyven, Goldman’s co-head of global commodities and head of oil research, said: “Of course attacks on pipelines and ports cannot be ruled out at this point. So pipelines can be a partial offset, but they are vulnerable and fragile on their own in an environment with elevated physical risks.”

Qatari Energy Minister Saad al-Kaabi told the Financial Times last week that all Gulf energy exporters would shut down production within days, driving oil to US$150 a barrel.

He also predicted that LNG prices would rise by almost four times the level before the war began, reaching US$40 per million British thermal units (mmBtu). He was probably referring to spot prices that are already close to US$30.

Last week, the US Henry Hub natural gas benchmark was US$2.97 per mmBtu, while the European Title Transfer Facility benchmark was at US$17.01 and the Japan-Korea Marker was US$15.495.

That shows how much more supply to Asia and Europe, which depends mostly on Middle East exporters, is at risk.

Electricity prices in Singapore are regulated by the Energy Market Authority (EMA), which last week said that the situation in the Middle East is likely to increase global energy prices and lead to higher domestic electricity rates.

Most electricity consumers here are spared an immediate price hike because they purchase electricity through either a fixed-price retail contract from retailers or are subject to the regulated tariff from state power utility SP Group.

Regulated tariffs are adjusted every quarter based on average fuel costs in the first 2½ months of the preceding quarter.

Also learning from the Ukraine-Russia war experience, Singapore is a bit better prepared to keep a cap on power tariffs for longer.

Since 2021, EMA has established a standby LNG facility, which power producers can draw from if supplies are disrupted. Producers are also required to maintain sufficient fuel for power generation based on their available generation capacity.

In 2023, EMA introduced the temporary price cap mechanism to act as a circuit breaker that is activated during periods of high and sustained volatility in Singapore’s wholesale electricity market.

Still, a sustained supply disruption can strain the efficacy of those arrangements.

Singapore relies on imported natural gas to generate about 95 per cent of its electricity.

In 2025, 43 per cent of its gas imports comprised piped natural gas from Malaysia and Indonesia. The remaining 57 per cent was LNG from different parts of the world, including Qatar.

The Gulf producer in 2025 supplied 42.5 per cent of Singapore’s LNG, according to research firm Rystad Energy.

However, energy firm Argus said imminent purchases of the more expensive spot LNG cargoes by Asian importers are unlikely, as they may continue to wait for further instructions from their governments and consider discussions with existing term-contract suppliers.

Jan Eric Fahnrich, senior analyst of gas and LNG research at Rystad, said countries in the region face a choice between accepting LNG cargoes from other producers or reducing demand through fuel-switching or outright curtailment.

“Still, removing more than 20 per cent of global supply is bound to affect all markets,” he added. THE STRAITS TIMES