Oil’s gains after Middle East tanker attacks tempered as trade war threatens global demand
- Swelling American stockpiles and signs of slowing consumption across the globe are weighing on prices
Oil’s rebound from a five-month low after tanker attacks in the Middle East was tempered by concerns over weak global demand and rising US inventories.
Futures in New York ended up 2.2 per cent, paring gains of as much as 4.5 per cent during the session. The US blamed Iran for attacks on two tankers near the Strait of Hormuz chokepoint – through which about a fifth of the world’s oil output travels – raising the prospect of a military confrontation and supply disruptions in the Middle East. However, swelling American stockpiles and signs of slowing consumption across the globe are weighing on prices.
Crude has faltered in recent weeks as trade tensions between the US and China, the world’s two biggest economies, threaten 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 an armed conflict between Iran and the US, 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.”
US 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 US 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 has turned to the Islamic Republic’s political adversaries – the Saudis – to keep crude markets adequately supplied.