May WTI crude oil (CLK26) today is up +2.40 (+2.63%), and May RBOB gasoline (RBK26) is up +0.0655 (+2.13%). Crude oil and gasoline prices settled mixed on Wednesday, with crude falling to a 3-week low.
Crude oil and gasoline prices are moving higher today as the US naval blockade of the Strait of Hormuz enters its fourth day, curbing oil supplies from the Middle East. Gains in crude oil accelerated today after Iran’s Tasnim news agency said the US must drop “excessive demands” if a peace deal is going to be reached. Also, today’s rally in the S&P 500 to a new all-time high shows confidence in the economic outlook that is supportive for energy demand and crude prices.
Hopes for peace in the Middle East are limiting gains in crude oil prices. The US and Iran are considering extending their ceasefire, which ends this coming Tuesday, by another two weeks to allow more time to negotiate a peace agreement.
Persian Gulf oil producers have been forced to cut production by roughly 6% due to the closure of the Strait of Hormuz as local storage facilities reach capacity. On Monday, the US began a blockade of all vessels passing through the Strait of Hormuz that call at Iranian ports or are headed there. The blockade could exacerbate global oil and fuel shortages, as about a fifth of the world’s oil and liquefied natural gas transits through the strait. Iran has been able to export crude during the war, as it exported about 1.7 million bpd in March.
The International Energy Agency (IEA) said Monday that about 13 million bpd of global oil supply has been shuttered by the Iran war and the closure of the Strait of Hormuz. The IEA also said that more than 80 energy facilities have been damaged during the conflict, and a recovery could take as long as two years.
Crude prices also have support after Saudi Arabia’s state producer, Saudi Aramco, raised the price of its main oil grade to Asia last week by $17 a barrel for May delivery, the biggest jump on record.
In a bearish factor for crude, OPEC+ on April 5 said it will boost its crude output by 206,000 bpd in May, although that production hike now seems unlikely given that Middle East producers are being forced to cut production due to the Middle East war. OPEC+ is trying to restore all of the 2.2 million bpd production cut it made in early 2024, but still has another 827,000 bpd left to restore. OPEC’s March crude production fell by -7.56 million bpd to a 35-year low of 22.05 million bpd.
