Meanwhile, OPEC output declines sharply due to the Strait of Hormuz closure: File Image/Pixabay

With U.S. president Donald Trump rejecting Iran’s latest proposal to end the war with his country and declaring that their ceasefire was on “life support,” nervous oil traders on Monday caused Brent to climb 2.9 percent to settle at $104.21 per barrel.

West Texas Intermediate rose 2.7 percent to settle at $98.07.

All analytical eyes were supposedly on Trump’s visit this week to China, where they speculated he could urge president Xi Jinping to pressure Iran into making concessions as the biggest buyer of the Islamic republic’s sanctioned crude.

Meanwhile, Israeli prime minister Benjamin Netanyahu warned that the conflict with Iran was “not over” but avoided speculating how long the hostilities would last, raising fears that more attacks and counterattacks could threaten oil supplies.

For their part, Citi analysts stated in a note, “We assume that the regime will make a deal that reopens the Strait [of Hormuz] around end-May … but we continue to see the risks skewed towards this timeline being pushed out and/or a partial reopening, which means disruptions for longer.”

Felipe Elink Schuurman, CEO and co-founder of Sparta Commodities, said the market will have to adjust and reach a level of demand destruction to counter a loss of 9 million barrels per day (bpd) of demand caused by the war, which he pointed out was the same demand loss witnessed during the 2020 pandemic lockdowns.

Schuurman added,  “Now the question is ‘where is that demand destruction going to come?’ And unfortunately, it’s going to be a situation where the richer countries are going to pay up…maybe you don’t see $200 on crude, but you will see that on a regular basis on products, which is what people consume.

“You are going to end up in a scenario where poorer countries are going to have a humanitarian crisis, Europe is going to have an economic crisis and the U.S., a political one.”

In other news related to the fallout of the U.S./Iran war, oil output from the Organization of the Petroleum Exporting Countries (OPEC) reportedly has declined to its lowest level since 2000, falling by 830,000 bpd to an average of 20.04 million bpd in April.

Kuwait logged the largest output drop, with zero crude exported in April due to its reliance on the Hormuz.

Saudi Arabia production dropped towards 7 million bpd following Iran attacks on energy infrastructure; however, the kingdom has primarily been using the 1,200 kilometre East-West Pipeline (Petroline) to transport its oil.

Thanks to being able to leverage the Fujairah terminal on the Gulf of Oman to bypass the bottleneck, the United Arab Emirates was the only Gulf member able to increase production in April; it is producing roughly 3.2 to 3.6 million barrels of oil per day.