The United States and Iran seemed to move closer to military conflict on Thursday, and it will probably keep a floor below oil prices until the threat of supply disruption in the Middle East passes, analysts say.
Iran's downing of a US military drone near the Hormuz stream has not caused oil supply losses, but it has blocked the tensions between countries already in conflict with recent attacks on two oil tankers – as well as previous attacks on others. tankers – that Washington owes Tehran. It is an increased concern for potential disruptions to global oil flows.
"Where the red line is for the United States [and]Iran [it appears] is getting closer," said James Williams, energy economist at WTRG Economics. "Queen of the drone may have crossed the edge …. There is a good chance that we will reciprocate."
July West Texas Intermediate Oil
CLN19, + 5.80%
rose $ 2.89 or 5.4% to settle at $ 56.65 per dollar. Barrel on the New York Mercantile Exchange. The contract ahead of the month, which expired at the end of the session, saw the largest one-day dollar and percentage points since late December, according to Dow Jones Market Data.
"All options [are] on the table, including military action from the United States and allies," says Daniel Flynn, market analyst at Price Futures Group and US sanctions against Iran "could be in place for a long time as the world community will become angry and trading partners Will not do business if the US administration supports the tough talk. "At the same time," Iran's current government will succumb to the people who hurt their country, "Flynn says.
In a tweet on Thursday, US President Donald Trump said "Iran made a very big mistake!" – adds expectations for further conflicts. In subsequent remarks, however, Trump said he suspected the attack might have been a mistake and that someone "loose and stupid" was responsible.
Trump Today: President suggests that Iran drone strike was a mistake when he took stock market victory
The events are a reminder of what happened at the end of 1980s, then-USA. President Ronald Reagan commissioned targeted attacks on Iranian naval facilities, Marshall Steeves, Energy Market Analyst at Informa Economics, MarketWatch said.
The oil market experienced a lot of volatility at the time, "although the world was much more dependent on the Middle East then," he said. In that sense, it may not be the best comparison, but it is the most appropriate one as it is the same situation as being an American-Iranian bias. "
Still, as far as Iranian exports are concerned," the impact is probably not too great immediately, as they are already smaller, "says Steeves." There is still fear that the strains of Hormuz might be narrowed or closed for now, It is just the possible loss of oil shipment. "Up to one-third of worldwide seaborne oil trade passes through the strait, but the effect" would depend on total decommissioning and in how long, "he said.
Read Iran's downing of American drone keeps the Hormuz beam in focus: Here's what you need to know
So "the duration of these attacks is the key to the rally's duration [in oil]. If, as last week, this is a one-off event, these gains can prove volatile, "says Steeves.
On the other hand, a sustained period of attack or" regular disruption of oil exports "in the Persian Gulf could send WTI back over Earlier this month, prices fell by more than 20% from April to April to a bear market.
Developments come at a particularly important time for the oil markets. with the summer run season and the organization of petroleum exporting countries led the production cutoff expiry at the end of this month, Scott Gecas, marketing director at Walsh Trading pointed out.
OPEC and its allies meet on 1-2 July to discuss the state of the oil market and decide whether to extend the oil production reduction agreement.
"With oil prices suppressed in recent weeks due to supplies Increases in the US, [they] have room to go up, "Gecas said.