To add settlement prices with a change of source to Houston

From the heritage of Somasekhar

HOUSTON, April 2 (Reuters) - U.S. crude prices surged more than 11 percent and Brent crude jumped nearly 8 percent on Thursday amid volatile trading, as traders worried about continued disruptions to oil supplies a day after U.S. President Donald Trump announced that the United States would continue its attacks on Iran.

Brent crude futures rose $7.87, or 7.78 percent, to settle at $109.03 a barrel. U.S. West Texas Intermediate crude futures also jumped $11.42, or 11.41 percent, to $111.54 a barrel, marking their biggest gain since 2020.

Both crude oils remained below the record levels of nearly $120 a barrel reached earlier in the conflict.

Trump said military operations would escalate, but did not provide details on any steps that might lead to the reopening of the Strait of Hormuz.

He added, "We will hit them very hard over the next two or three weeks. We will send them back to the Stone Age where they belong."

An official at the Iranian Foreign Ministry stated, following a Bloomberg News report, that Iran is drafting a protocol with the Sultanate of Oman to monitor shipping traffic in the Strait.

Iran effectively closed this waterway, through which a fifth of the world's oil and liquefied natural gas passes, in response to the US-Israeli strikes that began on February 28. Reopening it has become a priority for governments worldwide as energy prices soar.

“The question on traders’ minds is: if Iran’s oil infrastructure is compromised, and with the potential for further damage in the region, even if it remains intact, the resumption of oil flows in the region will be further delayed,” said Dennis Kessler, senior vice president of trading at Book Financial.

West Texas Intermediate (WTI) crude, which typically trades at a discount to Brent, was trading at nearly $3 above Brent, as the U.S. contract was for May delivery and the Brent contract was for June delivery. This marked WTI's highest premium over Brent in a year.

John Kilduff, a partner at Again Capital, said, "The market expects that if the Strait of Hormuz opens within two weeks, the risk premium will immediately decrease."

Citigroup forecasts that Brent crude will average $95 per barrel in its baseline scenario and $130 in its upside scenario during the second half of the year, while JPMorgan expects oil prices to rise to between $120 and $130 per barrel in the near term. It added that prices could exceed $150 if the Strait of Hormuz remains closed until mid-May.

Britain is hosting an online meeting of around 40 countries to discuss ways to reopen the Strait of Hormuz. The United States is not scheduled to participate.

Sources suggested that the OPEC+ alliance would consider an additional increase in oil production on Sunday, a move that would allow members to pump more barrels if the Strait of Hormuz were to reopen, but is unlikely to lead to a significant increase in supply before that happens.

In Russia, sources reported that Ukrainian strikes on Russian port infrastructure, pipelines and refineries have reduced export capacity by one million barrels per day, or one-fifth of total capacity.

The head of the International Energy Agency warned that supply disruptions would begin to affect the European economy from April, noting that the continent had previously been temporarily protected by shipments contracted before the outbreak of war.