Oil near $110 per barrel as Hormuz closure continues before Trump's deadline

Oil prices hovered around the level of $110 per barrel on Tuesday, with the approaching deadline set by American President Donald Trump for Iran to reopen the Strait of Hormuz or face military attacks.

Brent crude futures contracts fell by 95 cents, or 0.9%, to reach $108.82 per barrel by 09:20 GMT. Earlier in the session, West Texas Intermediate (WTI) crude contracts recorded the highest level in four weeks, exceeding $116 per barrel, but they gave up their gains later to decline only 11 cents to $112.30.

WTI crude usually trades at a price discount compared to Brent, however, this pattern was reversed in the current market, as near-delivery shipments became higher in price. This is due to the fact that the benchmark WTI contract is for May delivery, while the Brent contract is for June delivery.

Trump granted Iran a deadline until eight in the evening Washington time (midnight GMT) to reopen the strait, through which about one-fifth of global oil supplies usually pass. Iranian forces had effectively closed the strait after the start of the American and Israeli attacks on February 28.

Trump said that if Tehran does not comply, then "every bridge in Iran" will be destroyed by midnight Wednesday US Eastern Time, adding that "every power plant in Iran will be out of service, burning and exploding and will not be used again."

In response to an American proposal via the mediator Pakistan, Iran rejected the ceasefire, confirming that ending the war permanently is a fundamental condition, rejecting the pressures to reopen the strait.

The exports of a number of Gulf producers have already collapsed due to the restrictions imposed on passage through the strait, which led to a sharp rise in oil prices. According to an analysis by Reuters, Iran, Oman, and Saudi Arabia achieved significant financial gains from this situation, while other countries that do not possess alternative shipping routes suffered losses of billions of dollars.

It is expected that the UN Security Council will vote on Tuesday on a draft resolution to protect commercial navigation in the strait, but in a significantly weakened version after China's objection to granting a mandate to use force, according to diplomats.

The conflict also led to the rise of spot premiums for WTI crude to record levels, with Asian and European refineries racing to compensate for supplies coming from the Middle East.

In the same context, the Saudi oil company Aramco raised the official selling price for Arab Light crude to Asia for May delivery, recording a record premium of $19.50 per barrel above the Oman/Dubai average.

In another development, Russia announced on Monday that Ukrainian drones targeted the Caspian Pipeline Consortium terminal on the Black Sea, which handles about 1.5% of global oil supplies, while the Ministry of Energy in Kazakhstan confirmed on Tuesday that oil shipments through the facility remain stable.

The OPEC+ alliance had agreed on Sunday to increase oil production quotas by 206,000 barrels per day in May, however, this increase may remain largely theoretical because some key members are unable to raise production due to the continued closure of the Strait of Hormuz.