Yahoo Finance Oil rallies from multi-year lows as Trump threatens Iran
Oil futures rallied off multi-year lows on Thursday, after days of panicked selling in the market.
International Brent crude futures (BZ=F) rose by 7.7% on Thursday morning to $21.95 a barrel. US West Texas Intermediate crude futures (CL=F) were up 13.4% to $15.63.
Analysts said the price revival was driven by a tweet from US President Trump saying he had “instructed the United States Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea.”
Iran sits on the Strait of Hormuz, which is one of the most important sea passages for international oil trade. Flaring tensions in the region could put pressure on supply, which would support higher prices.
“The catalyst [for oil] seemed to be a tweet from President Trump,” Deutsche Bank strategist Jim Reid and team wrote in a note to clients on Thursday morning.
“While geopolitics has rather moved out of the headlines since the start of the year, it’s worth noting that it was only last week that the US Central Command said in a statement that 11 Iranian ships crossed the bows and sterns of US vessels at close range. So one to keep an eye on.”
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The large percentage price climbs continue the wild swings in the international oil market, which has been rocked by the impact of the global COVID-19 pandemic and subsequent oversupply.
US oil futures crashed into negative prices for the first time in history on Monday evening, with traders effectively paying people to take delivery contracts off their hands. US oil storage facilities have been filling up in recent weeks, meaning people could struggle to store barrels of oil.
“While technically, there is still 3 weeks of storage capacity at Cushing, Oklahoma, with about 30-40% tank ullage still available in the US – it is already booked and in the hands of traders and operators,” said Kang Wu, head of analytics, Asia, at commodities specialist S&P Global Platts.
“It’s probably the same case for storage around the world.”
Brent, the international benchmark, crashed to an 18-year-low on Tuesday as panic spread more widely. Pressure eased on Wednesday before Thursday’s stronger rebound. However, oil prices remain around a third lower than where they started the year.
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