Oil climbs more than 10% against the backdrop of escalation between Washington, Tehran
Oil prices climbed sharply in Asia on Thursday, escalating tensions between Iran and the United States overshadowing the drying up of demand for coronavirus and the saturation of storage facilities.
Around 6:25 GMT, a barrel of “light sweet crude” (WTI), the American benchmark for crude oil, for delivery in June, rose 1.6 dollars, or 11.61% to 15.38 dollars in electronic exchanges.
The barrel of Brent, European benchmark, also for June, gained 2.10 dollars, or 10.31% to 22.47 dollars.
Nonetheless, black gold prices remain at their lowest levels in years, as a result of a collapse in demand caused by the plunge in economic activity due to the restrictions imposed throughout the planet to fight the Covid-19 pandemic.
Prices have followed a rollercoaster-like trajectory in recent days, which has even seen US oil in negative territory for the first time in its history.
The collapse in global demand has saturated storage facilities.
Phillip Futures explained the current recovery, which started on Wednesday, with “heightened risks in the Middle East”.
WTI for delivery in June had already jumped 19% on Wednesday after statements by US President Donald Trump who warned in a tweet that he had given orders to “destroy” any Iranian boat that would dangerously approach American ships in the Gulf .
US reserves up
According to Washington, eleven speedboats from the Iranian Revolutionary Guards have repeatedly crossed the bow and stern of American ships patrolling the Gulf, “from an extremely close range and at high speed”.
Iran also announced on Wednesday the launch of a first military satellite, immediately denounced by the United States, which accuses Tehran of developing masked “missile” fire programs.
“Iran will be held accountable,” warned US Foreign Minister Mike Pompeo.
The Gulf is a major artery for the export of crude oil to world markets, and any increase in tension inevitably has a bullish impact on the price of black gold.
The surge in tensions overshadowed the weekly report from the United States Energy Information Agency (EIA), which reported an increase of 15 million barrels of US crude reserves on Wednesday.
In Cushing, Oklahoma in particular, where barrels serving as a reference for WTI are stored, reserves have increased by 5 million barrels and are approaching their maximum.
US supplies of gasoline and refined products have also increased, while weekly consumption has plummeted by more than 25% year on year while the population is confined.
Trump’s “strategy”?
Oil market specialists, Phillip Futures observed, are wary of “the reasons for the President’s press release (Donald Trump) when both the WTI and Brent are experiencing a historic crash”.
“It is very likely that the tweet is part of his administration’s strategy to weigh on oil prices,” Phillip Futures said in his note, recalling that American oil shale producers had been severely impacted by the falling prices.
According to analysts, geopolitical tensions will not have a lasting effect if the reserves are full.
“A rise in prices depends solely on an immediate coordinated action by OPEC +++ to limit the slide down and / or a sharp and improbable resumption of demand in May,” said Stephen Innes, strategist at AxiCorp, referring to the Organization of the Petroleum Exporting Countries and their allies who agreed in April to cut production by 10 mb / d to try to invigorate the markets.
But experts had considered this level insufficient to compensate for the drop in demand induced by the coronavirus, which appeared in China in December, and prices continued to decline.
SOURCE: en24.news
