Oil rises to two-week high as US and Iran trade strikes
FILE PHOTO: A pump jack operates in front of a drilling rig at sunset in an oil field in Midland, Texas U.S. August 22, 2018. Picture taken August 22, 2018. REUTERS/Nick Oxford/File Photo
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July 8 : Oil prices gained over 2 per cent on Wednesday, climbing to a two-week high after Iran and the U.S. traded airstrikes and Washington reimposed crude sales sanctions on Tehran, raising fears their fragile truce was unravelling and Middle East supplies could again be disrupted.
Brent crude futures gained $1.73, or 2.33 per cent, hitting $75.89 a barrel at 0755 GMT, while U.S. West Texas Intermediate crude climbed $1.57, or 2.23 per cent, to $72.01 a barrel. The benchmarks are at their highest levels since June 24.
Both rose about 3 per cent on Tuesday after the U.S. revoked the general licence authorising the sale of Iranian crude.
“The rally has continued this morning, and four oil and gas tankers have reportedly either decided not to transit the strait or been forced to turn around after Iran declared that the only safe shipping route through the Strait of Hormuz is the one designated by Tehran,” said PVM analyst Tamas Varga.
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The U.S. airstrikes were in response to Iranian attacks on three commercial vessels that were transiting the Strait of Hormuz, U.S. Central Command said on Tuesday. Iran’s Revolutionary Guards then said they targeted U.S. military sites in Bahrain and Kuwait early on Wednesday.
Iran’s parliament speaker Mohammad Baqer Qalibaf accused Washington of major violations of the provisional peace agreement, citing U.S. attacks on Iran, renewed oil sanctions, threats of further strikes, violations of Iranian “adjustments” in the Strait of Hormuz, and continued Israeli attacks against Lebanon.
“The latest developments have effectively thrown the future of the 60-day negotiation process into doubt,” said Bjarne Schieldrop, chief commodities analyst at SEB.
“In my view, a price closer to $80 a barrel is more consistent with current market fundamentals than $70,” he added.
After the U.S. and Iran signed their truce agreement last month, oil prices tumbled back to pre-war levels and traders amassed large short positions in oil futures, betting that prices would fall further.
Expectations of a wave of pent-up Middle East supply coming onto the market caused the price declines.
Iran did not take responsibility for the vessel attacks, but Qatar blamed Iran for them, including one on a Qatari liquefied natural gas tanker, which reported being struck by a drone that caused a fire in its engine room.
The attacks renewed concerns about tanker traffic through the Strait of Hormuz, which carried cargoes equal to about one-fifth of global energy supply before the war began in late February.
Since the start of the conflict, nations have drawn down their inventories to make up for the supply shortfall.
U.S. crude oil inventories fell again last week, market sources said on Tuesday, citing data from the American Petroleum Institute. Analysts polled by Reuters had expected crude stockpiles to decline by about 2.4 million barrels in the week ended July 3.
Source: Reuters
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