Oil Hits One-Month High
by Bloomberg | M. Gindis, A. Longley, G. Levin
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas
Oil climbed to a one-month high as renewed Middle East fighting heightened concerns over supplies through the Strait of Hormuz.
Oil rose to the highest in a month as traders digested US President Donald Trump’s U-turn on cargo payments in the Strait of Hormuz and more vessels in the waterway came under Iranian fire, threatening fresh disruptions to energy flows.
West Texas Intermediate futures rose 1.5% to settle above $79 a barrel, after earlier surging by roughly 4%. Brent finished near $85.
Trump, in a social media post on Tuesday, backed away from a plan he announced a day earlier to impose a 20% charge on cargo shipments through the strait after US allies in the Gulf urged him to drop it.
The reversal was a welcome sign for shippers shaken by the collapse of the US-Iran ceasefire and the prospect of further disruptions in the world’s most important energy chokepoint. It also illustrated the bind Trump is in, as hostilities with Iran flare and Tehran refuses to loosen its grip on the waterway, putting upward pressure on oil prices.
“Bloated money manager short covering, alongside the potential for larger scale CTA buying flows, will only exaggerate the upside,” said Ryan McKay, senior commodity strategist at TD Securities. “We need a hasty de-escalation or the energy market reaction to round two of this war could be much more severe.”
The commodity has soared in recent days amid renewed fighting in the region, including attacks on crude-laden vessels, and as the US reimposed a blockade on traffic to and from Iranian ports starting on Tuesday.
Trump’s now-defunct plan for a 20% charge on Hormuz cargoes would have worked out to about $30 million on a supertanker at current oil prices, far higher than the tolls that have been charged by Iran. The plan had been widely panned as impractical and unworkable.
“He needed an excuse to back out,” said Carolyn Kissane, associate dean at New York University’s Center for Global Affairs. “It’s in some ways to take the attention off the 20%, which he was getting criticized for and was ridiculous. So it’s saving face, plus sends to the market that the United States and the Gulf states continue to be strong partners and allies.”
The political shift came amid fresh reports of fighting across the Middle East. ABC reported that US airstrikes on Iran had been underway for hours, citing an American official, while Iran’s semi-official Fars news agency reported that multiple explosions were heard on the country’s Qeshm Island. Iran’s semi-official Mehr News Agency said Iran had launched missiles and drones at Kuwait and Bahrain, while Oman said a tanker had been targeted outside its waters.
Earlier in the day, two United Arab Emirates-linked tankers were struck, marking a direct attack on one of the biggest flows through the strait in recent months. Visible shipments through Hormuz have declined in recent days amid the uptick in fighting.
While crude markets have some buffer thanks to a rush of barrels out of Hormuz in recent weeks, inventories remain low and fuel markets are exceptionally strong. Prices for gasoline, diesel and jet fuel have been spiraling up faster than crude throughout the Iran conflict, stoking inflation and keeping consumers and central banks on edge.
“As long as the US blockade remains in place, there will be a heightened risk that Iran retaliates by disrupting oil exports from other Gulf countries for longer,” Capital Economics analysts including David Oxley wrote. “The key point is that the global oil market is now in a more vulnerable position to withstand further supply shocks than it was earlier this year.”
Iran, for its part, has been quietly moving oil tankers through the strait over the past few days as hostilities escalated. Six US-sanctioned supertankers transited the waterway into the Gulf of Oman over the past week with their transponders turned off, according to ship-tracking data compiled by Bloomberg.
Over the past month, Persian Gulf producers had begun marketing additional crude after the interim agreement eased export concerns. The UAE in particular proved highly successful at moving barrels by utilizing shuttle tankers sailing dark.
Oil Prices
- WTI for August delivery advanced 1.5% to settle at $79.34 a barrel.
- Brent for September settlement rose 1.7% to settle at $84.73 a barrel.
by Bloomberg | M. Gindis, A. Longley, G. Levin
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas