Oil prices jumped Monday as Middle Eastern countries cut production because the Strait of Hormuz remains closed due to threats from Iran, with no sign that the crucial chokepoint will be fully reopened in the near future.
West Texas Intermediate Crude futures were last up 6.3% at $96.63 a barrel as of 11:22 a.m. ET. WTI soared to $119 a barrel overnight, the first time it has topped $100 since Russia’s invasion of Ukraine in 2022. Brent Crude traded up about 6.9% at $99.09 a barrel, after hitting a high of $119.50 earlier in the session.
Finance ministers from the G7, or Group of Seven, met Monday to discuss a coordinated release of oil from their reserves. But French Finance Minister Roland Lescure said the group had not yet made a decision to do so. “We’re not there yet,” Lescure said The Financial Times.
Oil prices have fallen on expectations that oil reserves will be released at some point. American raw jumped about 35% last week, its biggest gain in futures trading history dating back to 1983.
Brent oil prices could rise as high as $135 per barrel if the current situation lasts for four months, Janiv Shah, vice president of oil markets at Rystad Energy, said in a note on Monday. Brent prices would exceed $110 a barrel if current conditions persist for two months, Shah said.
Stock chart iconStock chart icon
WTI crude oil, 5 years
Shortly after oil topped $100 as markets opened Sunday evening, President Donald Trump job on Truth Social, that a rise in “short-term oil prices” was a “very small price to pay” to destroy the Iranian nuclear threat.
“Only fools would think differently!” Trump added.
Gulf Arab states are cutting production because they are running out of storage space, as crude piles up with nowhere to go due to the closure of the strait. Oil tankers do not want to use this narrow waterway because they fear Iran will attack them.
The closure of the strait triggered the biggest disruption to oil supply historic, according to an analysis by consulting firm Rapidan Energy. Around 20% of global oil consumption is exported through the strait.
Iran’s Foreign Ministry spokesman warned Monday that the tankers “you have to be very careful.”
“Until the situation is safe, I think all tankers, all maritime shipping, need to be very careful,” Foreign Ministry spokesperson Esmail Baghaei told CNBC in an interview.
Kuwait, OPEC’s fifth-largest producer, announced preventive cuts On Saturday, its oil production and that of its refineries were in question due to “Iranian threats against the safe passage of ships through the Strait of Hormuz.” State-owned Kuwait Petroleum Corp. did not detail the extent of the reductions.
Production in Iraq, OPEC’s second largest producer, has effectively collapsed. Production at its three main southern oil fields fell 70%, to 1.3 million barrels per day, three industry officials said. Reuters on Sunday. These fields produced 4.3 million b/d before the war in Iran.
And the United Arab Emirates, OPEC’s third-largest producer, said Saturday it was “carefully managing offshore production levels to meet storage needs.” The Abu Dhabi National Oil Co., or ADNOC, said its onshore operations were continuing as normal.
Read more news about the US-Iran warThe war has shown few signs of easing despite Trump’s comments. claim it was “already won”. Iran has named Ayatollah Ali Khamenei’s son Mojtaba as its new supreme leader, according to reports. The United States and Israel killed Khamenei in the first days of the war.
Energy Secretary Chris Wright said Sunday that cross-strait traffic will resume after the United States destroys Iran’s ability to threaten oil tankers.
“We are not very far from a more regular resumption of maritime traffic in the Strait of Hormuz,” Wright told CNN in an interview. “We’re a long way from normal traffic at the moment. It will take a while. But again, worst case scenario it will take a few weeks, not months.”