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Oil prices jumped more than 7% back above $100 a barrel as the U.S. moved to block ships sailing through the Strait of Hormuz in a bid to throttle Iran’s oil exports. Brent crude for June delivery was up 7.1% to trade at $101.64 per barrel at 8.05 am ET on Monday, while WTI crude for May delivery soared 7.3% to trade at $103.66 per barrel.
Following the collapse of peace negotiations in Islamabad, Pakistan, President Donald Trump announced on Sunday that the U.S. navy would begin a blockade of the Strait of Hormuz, with enforcement set to officially begin on Monday at 10 a.m. ET (14:00 GMT). In response, Iran threatened to retaliate against Gulf ports on Monday.
Meanwhile, OPEC has lowered its world oil demand forecast for the second quarter by 500,000 barrels per day, citing the economic impact of the ongoing war in the Middle East, according to BloombergBNN. Global oil demand is now projected to average 105.07 million bpd for the second quarter, down from the 105.57 million bpd previously estimated in March. Downward revisions were applied to both OECD and non-OECD countries. However, OPEC has reiterated its forecast that global oil demand growth for the current year will clock in at 1.38 million bpd.
OPEC’s lower demand outlook comes at a time when the group’s oil production has collapsed due to the ongoing war. OPEC’s crude oil production plunged by a record 7.56 million barrels per day (bpd) in March to just 22 million bpd, good for a 25% decline. The crash was mainly triggered by the closure of the Strait of Hormuz, one of the world’s most important maritime chokepoints, typically handling approximately 20% of global supply. Iraq recorded the group’s steepest decline, with production falling by 2.76 million bpd to average just 1.63 million bpd. Saudi Arabia production dropped by 2.07 million bpd to 8.36 million bpd, though some losses were mitigated by alternative pipelines including the East-West pipeline. Meanwhile, UAE output fell by 1.44 million bpd to 2.16 million bpd.
By Alex Kimani for Oilprice.com
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