Oil Jumps After Tanker Attacks in Middle East - The Wall Street Journal

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David Hodari and

David Hodari
The Wall Street Journal
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• david.hodari@wsj.com

Sarah McFarlane

Sarah McFarlane
The Wall Street Journal
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• sarah.mcfarlane@wsj.com

Updated June 13, 2019 8:02 a.m. ET

Crude prices climbed sharply Thursday after an attack on two oil tankers in the Gulf of Oman, close to the Strait of Hormuz, where over a third of the world’s shipped oil passes through.

Brent crude, the global benchmark, was up 3.4% at $61.95 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were 2.9% higher at $52.63 a barrel.

The U.S. Navy said it was assisting two tankers after the attack. The development came amid heightened tensions between the U.S. and Iran in recent months, with Washington ratcheting up sanctions on Tehran in early May, aiming to reduce oil exports to zero.

“The oil market was believing that geopolitical tensions between Middle Eastern countries had subsided, but they’ve re-emerged here, increasing risk premium and fears of a supply shock,” said Geordie Wilkes, head of research at Sucden Financial Research.

A picture from Iranian state TV reportedly shows the tankers involved in an incident off the coast of Oman. Photo: -/Agence France-Presse/Getty Images

Four vessels in the same region were attacked in May, which Washington accused Iran of being behind. Iran has denied involvement. Oil prices also rallied following those attacks, along with assaults on Saudi Arabia’s East-West pipeline, although analysts said the geopolitical tensions were offset by concerns about a global economic slowdown and its impact on oil demand.

Thursday’s oil rally marked a rebound from heavy selling pressure Wednesday, which followed the U.S. Energy Information Administration’s reduction of its oil demand growth forecasts and bearish inventory data.

For now, analysts don’t expect any significant change to trade flows, even if insurance and shipping costs were to rise after the latest incident, due to the potentially greater costs of finding substitutes to Middle Eastern oil grades shipped from the region.

“Unless you see concrete cost implications or disruption risk, because the alternatives are likely to be more costly or come with problems in terms of the quality differences, there’s quite a high hurdle for buyers to make changes,” said Richard Mallinson, analyst at consulting firm Energy Aspects.

Shipowners could charge an additional risk premium for their tankers to be used in the region given the recent attacks.

“The insurance premium will go up I’m sure, and shipping rates will follow suit,” said Peter Hinchliffe, a U.K.-based independent marine consultant and former secretary-general of the International Chamber of Shipping, a trade body representing shipowners.

Write to David Hodari at David.Hodari@dowjones.com and Sarah McFarlane at sarah.mcfarlane@wsj.com

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https://www.wsj.com/articles/oil-prices-jump-after-suspected-tanker-attack-11560418265

2019-06-13 12:02:00Z
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