Crude prices surged Thursday, rebounding from a bruising prior session after reports that two oil tankers had been attacked in the Gulf of Oman, with fresh tensions in that region potentially posing a threat to global supplies.
West Texas Intermediate crude for July delivery CLN19, +3.05% jumped $1.57, or 3%, to $52.69 a barrel, but has managed a session high thus far of $53.11 a barrel. Gains were in contrast to a 4% drop that took oil prices down to $51.14 on Wednesday, marking the lowest front-month contract finish since Jan. 14, according to Dow Jones Market Data.
August Brent crude BRNQ19, +3.52% jumped $2.04, or 3.4%, to $62.01 a barrel, but gained as much as 4% as reports of the tanker attacks surfaced. The prior session saw Brent tumble 3.7% to $59.97 a barrel, the lowest front-month finish since Jan. 28.
Wednesday’s falls came after a report showing U.S. crude supplies climbed for a second week in a row. Simmering worries about energy demand on the back of growing U.S.-China trade tensions also pressured the commodity.
But geopolitical tensions jolted the price the other way on Thursday. The Associated Press and other media outlets said the U.S. Navy was assisting two oil tankers in the Gulf of Oman, near the Strait of Hormuz. One was reportedly adrift and on fire, and the Iranian media reportedly earlier that they had been targeted, without offering evidence.
“We know that geopolitical tensions in the region are worsening and raise supply-side concerns in terms of short-term outages etc.—but with OPEC already curbing output and U.S. production at a record high the market is far less susceptible to a shock,” said Neil Wilson, chief market analyst for Markets.com, in a note to clients.
Analysts at Commerzbank said the sharp rebound in prices may also be in response to Wednesday’s slump, “which in our opinion was not justified,” it told clients in a note.
“While U.S. crude oil stocks did continue to rise, contrary to expectations, they did so to a lesser extent than the API had reported the evening before. What is more, the refineries processed more crude oil and the gasoline inventory build was much smaller than in the preceding weeks,” said the analysts.
However, threats to the region are taken seriously as it is a vital shipping route for oil production around the Persian Gulf. The region has been the site of other attacks. On May 14, Yemen’s Houthi rebels, who are fighting Saudi Arabia, claimed responsibility for armed-drone attacks that halted pumping at a key Saudi oil pipeline. A day ahead of that incident, the Saudis said two of its tankers had been damaged in a sabotage attack. The U.S. has been blaming Iran for those attacks.
Monthly oil reports from the Organization of the Petroleum Exporting Countries and the International Energy Agency will be released on Thursday and Friday, respectively. The IEA’s report will include forecasts for 2020.
The market is awaiting a decision by OPEC and its allies on whether to extend their production-cut deal past the end of this month, when it expires.
In other energy trading, natural gas for July delivery NGN19, -0.88% slipped 0.7% to $2.369 per million British thermal units.
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