Oil prices remain around $110 per barrel as Hormuz remains closed ahead of the Trump deadline
Oil prices remained steady at approximately $110 a barrel on Tuesday as the deadline set by U.S. President Donald Trump approached, demanding Iran to open the Strait of Hormuz or face consequences.
Brent crude futures declined by 95 cents, or 0.9%, reaching $108.82 a barrel by 0920 GMT. U.S. West Texas Intermediate crude futures reached a four-week high of over $116 a barrel earlier in the session but subsequently lost those gains, trading down 11 cents, or 0.1%, at $112.30.
Typically, WTI is priced lower than Brent, but this trend has changed in a market where barrels for earlier delivery are valued more highly. The WTI contract is set for delivery in May, whereas the Brent contract is scheduled for June delivery.
Trump has set a deadline for Iran until 8 p.m. in Washington (midnight GMT) to reopen the Strait of Hormuz, a critical route for approximately one-fifth of the global oil supply. Iranian forces successfully closed the strait following the commencement of U.S. and Israeli attacks on February 28.
Trump stated that if Tehran does not comply, “every bridge in Iran will be decimated” by midnight EDT (0400 GMT) on Wednesday, and “every power plant in Iran will be out of business, burning, exploding, and never to be used again.”
In response to a U.S. proposal conveyed by mediator Pakistan, Iran dismissed the idea of a ceasefire, asserting that a lasting resolution to the conflict was essential, thereby resisting calls to reopen the strait.
Exports from several Gulf producers have already plummeted due to limited flows through the Strait of Hormuz, causing oil prices to surge. A Reuters analysis revealed that this led to significant financial gains for Iran, Oman, and Saudi Arabia, whereas other nations without alternative shipping routes have incurred losses amounting to billions of dollars.
The U.N. Security Council is set to vote on Tuesday regarding a resolution aimed at safeguarding commercial shipping in the strait, though it has been notably diluted following opposition from China, which vetoed the authorization of force, according to diplomats.
In addition to the atypical premium of U.S. crude oil futures over Brent, the ongoing conflict has caused spot premiums for WTI crude to soar to unprecedented levels as refiners in Asia and Europe rush to find alternatives to Middle Eastern supplies.
Saudi Arabia’s state oil company Aramco has increased the official selling price of its Arab Light crude to Asia for May delivery, establishing a record premium of $19.50 a barrel above the Oman/Dubai average.
On Monday, Russia reported that Ukrainian drones struck the Caspian Pipeline Consortium’s terminal located on the Black Sea, a facility responsible for 1.5% of the global oil supply. However, Kazakhstan’s energy ministry stated on Tuesday that oil shipments at the terminal remained stable.
OPEC+ reached an agreement on Sunday to raise oil output quotas by 206,000 bpd in May, although this increase will primarily be symbolic since key members are unable to enhance production due to the closure of Hormuz.
