Oil Surges as Tankers in Gulf Suffer Another Suspected Attack

Jun 12, 2019 by Heesu Lee and Grant Smith

(Bloomberg) Oil rebounded from the lowest in almost five months as two tankers were damaged in a suspected attack in the Gulf of Oman, just weeks after a previous incident in the region.Brent crude soared as much as 4.5% following reports of an assault on ships near the Strait of Hormuz, a critical passage for cargoes from the Middle East. The Japanese owner of one of the vessels told local media it had been hit by a “shell.” The second tanker, owned by Norway’s Frontline, suffered three detonations, the Norway Maritime Authority said. Both ships were evacuated.

The incident comes just a month after four vessels, including two Saudi oil tankers, were sabotaged in what the U.S. said was an Iranian attack using naval mines. Tehran denied the charge, and nobody has claimed responsibility for the latest assault.

Tensions have flared in the region as U.S. President Donald Trump attempts to choke off Iran’s oil revenues with tighter sanctions, and turns to the Islamic Republic’s political adversaries — the Saudis — to keep global crude markets adequately supplied. The alarm is reviving prices that have faltered for weeks amid the U.S.-China trade dispute and swelling American inventories.

“In the past weeks, the market has been in a panic about the perceived weakness in oil demand,” said Eugen Weinberg, head of commodities research at Commerzbank AG. “We’ve been wondering what piece of news would break the dam, and lead to a jump in prices.”

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This latest incident 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.

Brent for August settlement advanced 3.4% to $62.03 a barrel on London’s ICE Futures Europe Exchange at 11:13 a.m. local time, after touching $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 $9.13 to WTI for the same month.

WTI futures for July delivery gained $1.53, or 3%, to $52.67 a barrel on the New York Mercantile Exchange. Prices slumped 4% on Wednesday as U.S. government data showed crude stockpiles expanded by 2.2 million barrels last week.

Other oil-market news:
Kazakhstan made an energy-policy U-turn and is now backing a potential extension of the OPEC+ oil-cuts deal to the end of this year. Saudi Arabia, the world’s biggest oil exporter, seems willing for now to satisfy Chinese requests for extra crude as supplies are squeezed elsewhere. Oil-industry insiders plowed almost $24 million into their own shares in the past six weeks, a clear signal they’re skeptical the bear market in energy stocks will last.

Other oil-market news:

Kazakhstan made an energy-policy U-turn and is now backing a potential extension of the OPEC+ oil-cuts deal to the end of this year.
Saudi Arabia, the world’s biggest oil exporter, seems willing for now to satisfy Chinese requests for extra crude as supplies are squeezed elsewhere.
Oil-industry insiders plowed almost $24 million into their own shares in the past six weeks, a clear signal they’re skeptical the bear market in energy stocks will last.