Global Oil Demand Plummets as Strait of Hormuz Closure Hits Supplies

Global oil demand has taken a hit, according to Goldman Sachs' latest note. The bank estimates that global oil demand destruction in April was between 4 million and 5 million barrels per day (mb/d), driven by weaker consumption in China and Western Europe.

The closure of the Strait of Hormuz to oil tankers is believed to have reduced global demand by 4% to 5%, Goldman Sachs said. The bank's estimates were based on three different approaches, including an analysis of global refinery runs, high-frequency measures of oil demand, and estimates from other forecasters and trading houses.

While the demand decline poses downside risks to oil prices, Goldman Sachs also noted that there are significant upside risks if the strait remains closed and global supplies slump further. Brent crude futures settled at $93.09 a barrel on Friday, down $1.94 or 2.04%, while U.S. West Texas Intermediate crude finished at $90.54 a barrel, down $2.50 or 2.69%.