Crude has faltered in recent weeks as trade tensions between the U.S. and China, the world’s two biggest economies, threatens demand and returns from turning crude into fuel falls from Asia to Europe. Thursday’s price gain gives bulls a reprieve, as the tanker attacks raised fears that diplomatic efforts won’t avert a armed conflict between Iran and the U.S., which has imposed sanctions on the OPEC member.
“Oil markets today reacted to what they saw, it’s a hot box and it’s becoming hotter,” said Jeff Klearman, portfolio manager at GraniteShares in New York. “There’s potential for this type of action to overrule and become a more important factor than supply.”
U.S. officials have determined Iran was responsible for the latest attacks, Secretary of State Michael Pompeo told reporters in Washington, noting that Iran had previously threatened to curtail oil transport in the Strait of Hormuz.
Iranian officials have denied any involvement, with Foreign Minister Javad Zarif suggesting that Iran’s enemies may have been behind the attacks and reiterating calls for a regional dialogue.
Thursday’s incident comes just a month after four vessels, including two Saudi tankers, were sabotaged in what the U.S. said was an Iranian attack. Tehran denied the charge, and nobody has claimed responsibility for the latest assault. Following America’s tighter sanctions on Iran, the Trump Administration’s turned to the Islamic Republic’s political adversaries — the Saudis — to keep crude markets adequately supplied.
The latest attacks could set the stage for a tense meeting when the OPEC cartel — to which both Saudi Arabia and Iran belong — and its allies gather in coming weeks to decide oil-production levels for the second half of the year. The group has been struggling to settle on an exact date as the Saudi-Iran dispute once again impedes its ability to make decisions.
WTI futures for July delivery closed up $1.14 at $52.28 a barrel on the New York Mercantile Exchange, after earlier climbing to $53.45. Even after Thursday’s gain, prices are still down over 3% for the week.
Brent for August settlement advanced 2.3% to 61.31 a barrel on London’s ICE Futures Europe Exchange, after reaching as high as $62.64 earlier. It fell 3.7% on Wednesday to the lowest in almost five months. The global benchmark crude traded at a premium of $8.77 to West Texas Intermediate for the same month.
The manager of one vessel, a Japanese oil products tanker, said it considered the incident a “hostile attack.” Its owner told local media it was hit by a “shell.” The second tanker, owned by Norway’s Frontline Ltd., suffered three detonations, the Norway Maritime Authority said. Both ships were evacuated, the crews were unharmed.
Frontline’s Front Altair tanker was carrying naphtha from the Persian Gulf to Taiwan. The second, smaller tanker, the Kukoka Courageous, was shipping methanol to Singapore. The U.S. Navy said its ships were in the area and rendering assistance.