Global oil supply is at risk following reports of two tankers attacked near the Strait Hormuz in Oman causing oil shares to surge, rebounding from a bruising prior session with current tensions in the region posing significant threats on global oil supply.
West Texas Intermediate crude for July delivery CLN19, +3.68% jumped $1.85, or 3.6%, to $52.98 a barrel, but has managed a session high thus far of $53.11 a barrel. According to Dow Jones Market Data, gains were in contrast to a 4% drop that took oil prices down to $51.14 on Wednesday, marking the lowest front-month contract finish since Jan. 14.
Wednesday’s falls follow reports showing U.S. crude inventories increased for the second week in a row. Furthermore, the growing tension over US-China trade war also posed threats in the commodity.
However, geopolitical pressure has moved the market the other way around as reports also revealed the efforts of the U.S. Navy in assisting the two oil tankers in the Gulf of Oman, near the Strait Hormuz.
“We know that geopolitical tensions in the region are worsening and raise supply-side concerns in terms of short-term outages etc.—but with OPEC already curbing output and U.S. production at a record high the market is far less susceptible to a shock,” said Neil Wilson, chief market analyst for Markets.com, in a note to clients.
Other analysts also posit that the jump in oil share prices may also be a response to Wednesday’s sag which they think were not justified.
“While U.S. crude oil stocks did continue to rise, contrary to expectations, they did so to a lesser extent than the API had reported the evening before. What is more, the refineries processed more crude oil and the gasoline inventory build was much smaller than in the preceding weeks,” said the analysts.
