Oil Prices Surge Nearly 3% Amid Hormuz Disruption Outweighing UAE's OPEC Exit Decision

Oil Prices Surge Nearly 3% as Strait of Hormuz Disruptions Weigh on Markets

Oil prices rallied nearly 3% on Tuesday, driven by persistent concerns about supply constraints stemming from the closed Strait of Hormuz, despite the United Arab Emirates' (UAE) decision to leave the Organization of the Petroleum Exporting Countries (OPEC) and the OPEC+ group.

Brent futures for June ended at $111.26 a barrel, a $3.03 or 2.8% gain, marking its seventh consecutive day of increases. U.S. West Texas Intermediate (WTI) futures for June settled at $99.93 a barrel, up $3.56 or 3.7%, after briefly trading above $100 for the first time since April 13.

The UAE's decision to exit OPEC+ on May 1, announced on Tuesday, initially weighed on oil prices. However, the impact was short-lived as the market focused on the Strait of Hormuz, a critical artery of global supply that has been disrupted due to the conflict between the United States and Iran.

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U.S. West Texas Intermediate (WTI) vs. Brent Futures Prices

The Strait of Hormuz, which accounts for about 20% of global oil and liquefied natural gas supplies, has been closed since Iran shut shipping flows through the strait. The conflict has left the market factoring in a prolonged disruption, with traders expecting oil prices to continue their slow march higher.

The United States and Iran's nuclear program talks have stalled, with no clear path to reopening the Strait of Hormuz. This has led to significant disruptions in the region, with six Iranian oil tankers forced to turn back due to the U.S. blockade. However, some traffic is still moving, with the Idemitsu Maru, a Panama-flagged tanker carrying 2 million barrels of Saudi oil, and an LNG tanker managed by the UAE's Abu Dhabi National Oil Co (ADNOC) crossing the Strait on Tuesday.

The amount of crude oil held around the world on tankers that have been stationary for at least seven days rose to 153.11 million barrels as of April 24, the highest since January, and up 25% from 122.60 million on April 17, according to Vortexa data.

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The World Bank warned on Tuesday that global energy prices could rise 24% in 2026 to their highest level since Russia's invasion of Ukraine, even if the most severe Middle East supply disruptions ease by May. The baseline assumes shipping through the Strait of Hormuz gradually recovers by October, but the risks are "markedly tilted" toward higher prices.

In the United States, gasoline prices climbed to their highest in nearly four years, AAA data showed. Later in the day, market sources citing American Petroleum Institute figures said the U.S. had drawn down 8.67 million barrels of gasoline in the week ended April 24, while crude oil inventories also declined.

A Ukrainian drone attack sparked a major blaze at Russia's Tuapse refinery, which has an annual production capacity of 240,000 barrels per day, turning out naphtha, diesel, fuel oil, and vacuum gasoil.

Meanwhile, China may resume fuel exports in May after state oil firms applied for permits to ship gasoline, diesel, and jet fuel, the Financial Times reported, citing traders.