Strait of Hormuz Crisis Pushes Oil Above $104 as OPEC Output Hits 20-Year Low
Primary region Middle East
Tags Energy · Economy · Diplomacy
Regions Middle East
Brent crude oil climbed above $104 per barrel on May 12 after Trump rejected Iran's peace proposal, extending the effective closure of the Strait of Hormuz that has disrupted global energy supplies for over 70 days. OPEC crude output plunged 830,000 bpd to 20.04 million bpd in April — the lowest level since at least 2000. Saudi Aramco's CEO warned the global market has lost approximately 1 billion barrels over the past two months. The US EIA estimates 10.5 million bpd of output lost in April across the Middle East. Morgan Stanley warned of a 'race against time' with base case Dated Brent at $110 this quarter and a bull case of $130-150. The UAE was the only Gulf producer to increase exports via a Hormuz-bypass route.
Strategic interpretation
The energy crisis gives Iran significant leverage through the Hormuz chokepoint while simultaneously creating global economic pressure for a resolution. China and India, as the largest importers of Hormuz oil, have the most to lose from prolonged closure — which may explain both Beijing's reluctance to pressure Tehran and New Delhi's quiet bilateral diplomacy with Iran. The longer the closure persists, the greater the incentive for all parties to negotiate.