Crude gains as Israel and Iran clash after Trump's sanctions move
SEOUL and TOKYO (Bloomberg) -- Oil extended gains above $71/bbl on the risk of supply disruptions as a conflict between Israel and Iran ratcheted up, and after the U.S. renewed sanctions on OPEC’s third-largest producer.
Futures in New York added 0.9%. Israel said Iran fired missiles at its soldiers in the Golan Heights and retaliated by striking Iranian targets in Syria, bringing the Middle East nations closer to a direct conflict. Prices jumped 3% Wednesday after President Donald Trump said the U.S. would exit a 2015 nuclear deal between the Persian Gulf state and world powers that had eased restrictions on the Islamic Republic’s crude exports.
Oil has been driven to the highest levels since 2014 as traders anticipated the move by Trump and on simmering geopolitical tensions in the Middle East. While the full impact of the U.S. exit from the nuclear accord is still unclear, the re-imposition of far-reaching sanctions is expected to start reducing shipments from Iran. Saudi Arabia signaled it could make up lost supplies, and Goldman Sachs Group said there’s a chance prices may exceed its forecast.
Also boosting oil is government data showing American oil stockpiles fell by 2.2 MMbbl last week, in contrast to a 1 MMbbl gain forecast by analysts in a Bloomberg survey.
“Oil’s always prone to rise on geopolitical tensions and the ongoing conflict between Iran and Israel is not something that can be resolved in the short-term,” Will Yun, a commodities analyst at Hyundai Futures Corp., said by phone in Seoul. “While prices are currently rising on Trump’s decision to reimpose sanctions on Iran, we may see some limitations to the rally as any lost volumes can be supplied by other producing nations.”
West Texas Intermediate crude for June delivery rose as much as $0.61 to $71.75/bbl on the New York Mercantile Exchange and traded at $71.69 in Singapore. Prices gained $2.08 to close at $71.14 on Wednesday, the highest settlement since November 2014. Total volume traded was about 17% above the 100-day average.
Brent for July settlement added as much as 0.7% to $77.75/bbl on the London-based ICE Futures Europe exchange. Prices on Wednesday climbed 3.2% to $77.21. The global benchmark crude traded at a $6.14 premium to July WTI.
“Until we see the U.S. and Iran having a talk on resolving the issue, oil prices will extend its rally,” Ahn Yea Ha, a commodities analyst at Kiwoom Securities, said by phone from Seoul. “Distillate and gasoline stockpiles have been shrinking in America, suggesting that fuel demand is healthy, which will ultimately lead to a draw in overall crude inventories."
