Oil Prices Jump after Trump Threatens Iran over Strait of Hormuz

JAKARTA - Oil prices rose on Sunday after US President Donald Trump gave Iran a deadline until Tuesday to open the Strait of Hormuz. Otherwise, Trump threatened to attack power plants and bridges in the country.

Based on a report by CNBC quoted on Monday, April 6, US crude oil had broken through 114 US dollars per barrel. However, at 21.28 Eastern time, US crude oil futures for May were up 0.5 percent to 112.08 US dollars per barrel. Meanwhile, Brent for June delivery rose 1.3 percent to 110.47 US dollars per barrel.

Trump delivered the threat via a social media post on Sunday. Quoted from CNBC, Trump said Iran would "live in hell" if it did not open the strait. Shortly thereafter, Trump wrote again, "Tuesday, 8:00 P.M. Eastern Time!" without further explanation.

The Strait of Hormuz is still effectively closed after Iran attacked oil tankers. This waterway connects the Persian Gulf with the world market. Before the war broke out, about 20 percent of global oil supplies passed through the strait.

The closure of the Strait of Hormuz triggered the largest oil supply disruption in history. Crude oil, jet fuel, diesel, and gasoline prices have soared since the war began. In a national address last Wednesday, Trump said the war would continue for two to three weeks.

Still referring to CNBC's report, TD Securities estimates that nearly 1 billion barrels of supply will be lost by the end of this month. The amount consists of up to 600 million barrels of crude oil and about 350 million barrels of refined products. TD Securities senior commodity strategy analyst Ryan McKay said the conflict, which is expected to last at least until April, makes the outlook for oil supply more bleak.

Meanwhile, Rapidan Energy estimates that net oil and oil product losses reached 630 million barrels by the end of June, after taking into account diversions of flows through pipelines, the release of emergency reserves, and the draining of inventories.

Amid this situation, eight OPEC+ members on Sunday agreed to increase production by 206,000 barrels per day in May. However, it is not clear how the additional supply can enter the global market as the Strait of Hormuz is still closed.

Kuwait Petroleum Corporation also said that a number of its operational facilities were attacked by drones and suffered significant damage. According to CNBC, OPEC + warned that repairing energy infrastructure damaged by the Iranian attack would cost a lot of money and take a long time, thus affecting the overall availability of supplies.

The eight OPEC+ members are Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman.