Oil Price Fundamental Daily Forecast – Prices Jump After Tanker Explosions in Gulf of OmanDespite the concerns about rising U.S. supply and weakening global demand, the main price driver today is likely to be concerns over the possible supply disruption in the Gulf of Oman, and the potential for escalating tensions between the United States and Iran.
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are up over 3% on Thursday on supply disruption concerns following reports of tanker explosions in the Gulf of Oman.
According to the reports, United Kingdom Maritime Trade Operations, a division of the U.K. Royal Navy, said it is currently investigating what it has called an “incident” in the Gulf near the Iranian coastline. It has urged “extreme caution” amid mounting tensions between Iran and the U.S.
Furthermore, a spokesman for the US Navy’s Fifth Fleet in Bahrain told the Associated Press that his command was “aware” of the incident and was seeking further details, U.S. Naval ships are in the area and are “rendering assistance” after forces in the region received two separate distress calls, the Fifth Fleet said.
Reuters is reporting that two tankers were hit in suspected attacks in the Gulf of Oman and the crew have been evacuated, shipping sources said Thursday, a month after a similar incident in which four tankers in the region were struck.
Reuters also identified the two tankers as the Marshal Islands-flagged Front Altair and the Panama-flagged Kokuka Courageous.
Prices Pressured Wednesday by Bearish Government Report
The news of the potential supply disruption comes less than one day after a bearish U.S. government report drove price sharply lower on Wednesday.
The U.S. Energy Information Administration (EIA) on Wednesday reported crude stockpiles rose unexpectedly for a second week in a row, climbing 2.2 million barrels the week-ending June 7. Traders were looking for a drawdown of about 481,000 barrels.
U.S. stockpiles now stand at 485.5 million barrels, the highest level since July 2017. This is 8% above the five-year average for this time of year.
The sell-off in reaction to supply concerns on Wednesday was preceded by early weakness fueled by predictions of lower demand. The EIA cut its forecasts for 2019 world demand growth.
Additionally, government data showed that hedge fund managers continued to liquidate long positions at the fastest rate since the fourth quarter of 2018 due to rapidly increasing fears about a global economic slowdown.
Despite the concerns about rising U.S. supply and weakening global demand, the main price driver today is likely to be concerns over the possible supply disruption in the Gulf of Oman, and the potential for escalating tensions between the United States and Iran.
This is a developing story so prices could continue to rise or fall depending on how much oil was lost, and whether there is proof that Iran was behind the alleged attacks. Furthermore, traders are waiting for an official response from the U.S. Prices could soar if the U.S. responds with military action.