Brent Crude Surges Past $109 as Strait of Hormuz Closure Triggers Record Reserve Drawdowns

Brent crude futures for June delivery surged over 3% on Monday, peaking above $109 per barrel. The price spike reflects intensifying market fears surrounding the closure of the Strait of Hormuz, where Iranian restrictions and U.S. naval blockades have effectively halted oil transit through the crucial waterway. To mitigate the supply gap, International Energy Agency (IEA) member nations are tapping emergency stockpiles at a record pace. According to Goldman Sachs, global inventories are draining by 11 million to 12 million barrels per day. This follows a coordinated release of 400 million barrels in early March, including 172 million barrels from the U.S. Strategic Petroleum Reserve (SPR). The scale of the drawdown is historic. Prior to the conflict, IEA members held over 1.2 billion barrels, while China maintained a separate stockpile of 1.4 billion barrels. However, the current rate of depletion is unsustainable. Goldman Sachs analysts warn that if transit through the Strait does not normalize by the end of July, Brent crude is likely to remain above $100 for the remainder of the year. The crisis is creating a bifurcated benefit within the energy sector. Midstream companies are seeing increased fee-based income as they facilitate the movement of SPR oil to refineries. Specifically, Enterprise Products Partners (EPD) and Enbridge (ENB) are benefiting from higher volumes on the Seaway Pipeline, while Energy Transfer (ET) is seeing increased utilization of its Nederland Terminal and extensive pipeline network. Oil producers are also seeing immediate gains from the elevated crude benchmarks.