Oil rises again on tension fuelled by tanker attacks

The loaded tanker MT Front Altair is pictured on fire and adrift in the Gulf of Oman, June 13, 2019. — Picture courtesy of Twitter/front altair
The loaded tanker MT Front Altair is pictured on fire and adrift in the Gulf of Oman, June 13, 2019. — Picture courtesy of Twitter/front altair

LONDON, June 14 — Oil prices rose again today in reaction to geopolitical tension, building on the previous day’s surge sparked by suspected attacks on two tankers in the Gulf of Oman.

The US government blamed Iran for mysterious explosions on the tankers, and there were growing fears that Iran could close the Strait of Hormuz, a major choke point for world oil shipments.

Despite a potentially disastrous standoff between the two foes, oil traders were “not getting carried away”, said Craig Erlam, senior market analyst at OANDA.

Prices jumped by more than four per cent at one stage yesterday as reports of the attacks in the Gulf of Oman flashed onto traders’ screens.

‘Not risen too much’

“Oil prices may have spiked following the attacks but they have not risen too much considering the risk that an escalation poses,” said Erlam.

“Perhaps this is a sign of how pressured oil prices are to the downside at the moment, with the US pumping at record levels and the global economy slowing.”

The International Energy Agency said earlier today that tepid growth in demand for oil along with ample supplies from non-Opec countries will complicate efforts by the cartel and its allies to boost prices.

In its monthly report, the agency cut its forecast for demand growth this year for the second month straight — and trimmed its second quarter forecast as well.

“Global slowdown fears and trade war risks have intensified which has led to the latest downward revision from IEA,” Erlam told AFP.

Global stock markets meanwhile fell on geopolitical fears, uncertainty over the China-US trade row and the gloomy outlook for the global economy, traders said.

Hong Kong dips again

In Asia, the Hong Kong stock market was again on the back foot, losing 0.7 per cent, after the city was rocked this week by violent protests against government plans for a law that would allow extraditions to China and which observers warn could erode its attraction for businesses.

European and US stocks were also lower.

Trading floors have been the scene of unease for weeks since President Donald Trump’s shock decision to hit China with higher tariffs despite expectations the two sides were close to a deal to end their long-running stand-off.

The uneasiness over the past week has seen the price of gold hit a 15-month high of around US$1,360 per ounce as traders look for safer assets to shelter from the uncertainty on world markets.

Eyes are now on the G20 summit in Japan later this month where Trump and his Chinese counterpart are expected to meet to discuss the issue, though Washington has been playing down the chances of a deal being struck.

However, support has come from bets that the Federal Reserve will cut interest rates soon as the economy stutters and the trade war rumbles along.

Key figures around 1330 GMT

Oil – Brent North Sea: UP 37 cents at US$61.68 per barrel

Oil – West Texas Intermediate: UP 10 cents at US$52.38

London – FTSE 100: DOWN 0.4 per cent at 7,340.82 points

Frankfurt – DAX 30: DOWN 0.5 per cent at 12,104.77

Paris – CAC 40: DOWN 0.2 per cent at 5,362.69

EURO STOXX 50: DOWN 0.4 per cent at 3,378.22

New York – Dow: DOWN 0.1 per cent at 26,076.33

Tokyo – Nikkei 225: UP 0.4 per cent at 21,116.89 (close)

Hong Kong – Hang Seng: DOWN 0.7 per cent at 27,118.35 (close)

Shanghai – Composite: DOWN 1.0 per cent at 2,881.12 (close)

Euro/dollar: DOWN at US$1.1235 from US$1.1276 at 2100 GMT

Pound/dollar: DOWN at US$1.2620 from US$1.2674

Dollar/yen: UP at 108.45 yen from 108.38 yen

— AFP