Crude Climbs as Saudis Suspend Shipments After Tanker Attack
(Bloomberg) -- Crude advanced as an attack on Saudi Arabian tankers combined with dwindling U.S. stockpiles helped bulls push oil higher.
Futures in New York rose 0.5 percent on Thursday. The geopolitical risk premium in the market crept higher as Saudi Arabia temporarily halted oil shipments via the Bab el-Mandeb Strait after it said two tankers were attacked by Yemeni Houthi militia. Adding fuel to the rally are U.S. crude inventories at the lowest since 2015 and softening trade tensions between the U.S. and the European Union.
“These are all really bullish events for the barrel,” said Michael Loewen, a commodities strategist at Scotiabank in Toronto. “The market is starting to realize the geopolitical risk is not going away anytime soon.”
This month, investors have assessed tariff concerns between the U.S. and China and how they might weaken oil demand. At the same time, traders are also looking at OPEC’s pledge to pump more oil and U.S. sanctions against Iran. U.S. policies may weigh on crude prices in the near term, but that doesn’t represent a reversal in oil’s bull trend with crude likely to retest $80 a barrel later this year, according to Goldman Sachs Group Inc.
West Texas Intermediate crude for September delivery rose 31 cents to settle at $69.61 a barrel on the New York Mercantile Exchange.
WTI second-month futures implied volatility dipped to the lowest level since March after hitting the highest since 2017 earlier this month.
Brent for September added 61 cents to end the session at $74.54 a barrel on the London-based ICE Futures Europe exchange. Brent traded at a $4.93 premium to WTI. Options on the September Brent contract expire Thursday.
The two vessels, each with a capacity of 2 million barrels of oil, belong to the Saudi National Shipping Co., Energy Minister Khalid al-Falih said in a statement.
The Bab el-Mandeb Strait, off the shores of Yemen, Djibouti, and Eritrea, connects the Red Sea with the Arabian Sea and is one of the world’s major waterways for crude oil and other petroleum products. Saudi Arabia can still use its East-West mega-pipeline to transport crude from its fields in the Persian Gulf to the city of Yanbu on the Red Sea, bypassing the strait and keeping the European market within regular reach.
Other oil-market news:
- Gasoline futures climbed 1.9 percent to settle at $2.1623 a gallon, the highest level in more than three weeks.
- U.S. President Donald Trump says he’s close to granting a waiver that would allow year-round sales of E-15 blend ethanol.
- OPEC shipments will decline to 24.47 million barrels a day in the four weeks to Aug. 11 versus the period to July 14, tanker-tracker Oil Movements said in a weekly report.
- WTI Midland crude traded at the lowest level in nearly four years as growing Permian production strains available takeaway pipeline capacity.
- ConocoPhillips is in talks with Petroleos de Venezuela SA to settle a $2.04 billion arbitration decision and end a global legal war between the two oil producers.
©2018 Bloomberg L.P.