Brent crude oil rallied after Saudi Arabia said two of its tankers were attacked on Sunday, adding to the mounting geopolitical risks in the market.
Futures in London added as much as 1.9%. Saudi Arabia said two of its oil tankers were affected while sailing toward the Persian Gulf, though no one has yet claimed responsibility. Separately, U.S. officials are expected to release details of additional tariffs of 25% on all remaining Chinese imports Monday. That comes after Beijing vowed retaliation for Washington raising levies on $200 billion of Chinese goods Friday.
The attacks on tankers in the Persian gulf are a signal of the growing political risk in the oil market since the U.S. ended waivers for sanctions on Iran earlier this month. Prices had been struggling to gain in recent weeks against a backdrop of increasing trade tensions between the U.S. and China, which damped the macroeconomic outlook. However, the geopolitical risk in the Middle East, coupled with outages from the North Sea to Venezuela, are now buoying prices.
“The oil market is reacting very sensitively to supply disruption risks considering the market is already tight,” said Giovanni Staunovo, an analyst at UBS Group AG. “Any additional disruption would further tighten the oil market.”
Brent crude for July settlement gained as much as 1.9% on Monday and traded up $1.32 at $71.94 a barrel on the London-based ICE Futures Europe exchange as of 10:30 a.m. local time. It fell 0.3% last week. The global benchmark contract is trading at a $9.17 premium to West Texas Intermediate crude.
WTI for June delivery rose 98 cents to $62.64 a barrel on the New York Mercantile Exchange. The contract lost 0.5% last week.
The Saudi tankers were damaged while heading toward the Persian Gulf, the state-run Saudi Press Agency reported. The U.S. has deployed an aircraft carrier, bomber planes and defense missiles to the region amid rising tensions with Iran, which has threatened to block the Strait of Hormuz, the world’s most important choke-point for oil.
The incident comes after an outage at a field in the Norwegian North Sea last week that affects around 6% of Norway’s total oil output. That disruption saw timespreads in the Brent market — a gauge of supply tightness — surge late last week, reaching more than $1 a barrel on Friday.
Separately, China’s state media blamed the U.S. for the breakdown in trade negotiations and talked up the nation’s economic resilience, while President Donald Trump said his country is “ right where we want to be.” Larry Kudlow, Trump’s top economic adviser, said Sunday that no date has been set for further talks, though he raised the possibility that the U.S. and Chinese leaders could meet on the sidelines of a Group of 20 summit in Japan at the end of June.
Other oil-market news: Hedge funds lifted bearish bets on WTI crude by 39%, the biggest short-selling surge in more than eight months. The Houston Ship Channel reopened to limited traffic on Sunday after a vessel collision dumped almost 400,000 gallons of a gasoline ingredient and choked suburbs of the U.S. city with noxious fumes. It’s the second time the city has been spooked by benzene plumes in eight weeks. Iran has set its Light Crude official selling prices for Asian customers at the highest level since August.