Oil on Friday jumped in after-market trading following Iran’s seizure of a British oil tanker and a Liberian-flagged ship in the Strait of Hormuz, raising stakes in the critical oil choke point.
Brent futures rose as much as 1.4 percent from its settlement, while West Texas Intermediate futures also edged higher after the seizure of the tankers.
British Secretary of State for Foreign and Commonwealth Affairs Jeremy Hunt said that he is “extremely concerned by the seizure of two naval vessels by Iranian authorities in the Strait of Hormuz.”
“With all the noise about potential negotiations with Iran, the reality is that geopolitical risk is enormously high in the heart of the oil producing [Persian] Gulf and key transport corridor,” said Joe McGonigle, an energy policy analyst for Hedgeye Risk Management and a former senior official at the US Department of Energy.
“Iran’s only response to maximum pressure by the US is maximum chaos in the region that tries to win concessions from the US. Iran’s seizure of the British tanker is just one example and we think the market should get prepared for more risk ahead,” he added.
Despite the escalating conflict in the Middle East, New York futures ended the week 7.6 percent lower, the biggest weekly loss in nearly two months, amid fears about waning demand.
A US-China trade war and expanding US fuel stockpiles have also weighed on prices.
“The biggest factor driving oil prices today is the Iran-US tension story,” Price Futures Group Inc senior market analyst Phil Flynn said. “The rallies appear to show the conflict in [the] Strait of Hormuz might be more serious and that stakes are raised going into this weekend.”
West Texas Intermediate for delivery next month traded at US$55.76 a barrel at 4:46pm after settling at US$55.63 per barrel on the New York Mercantile Exchange.
Brent for September settlement traded as high as US$63.37 per barrel before trading at US$62.87 per barrel. The benchmark closed at US$62.47 on the ICE Futures Europe Exchange.
After the British tanker Stena Impero was escorted into Iranian waters, a second vessel in the area, the Liberian-flagged Mesdar, appeared to turn toward the Iranian coast, ship tracking data showed.
The second ship has left Iranian waters, Fars news agency said.
In Washington, US President Donald Trump said that he would be “working with the UK” on the incident and suggested the latest developments justify his harsher approach toward Tehran.
“This only goes to show what I’m saying about Iran: trouble, nothing but trouble,” he added.
A spokesman for the Iranian Guardian Council suggested that the move against at least one of the ships was in retaliation for the British seizure of a tanker carrying Iranian crude earlier this month.
“This is the second time in just over a week the UK has been the target of escalatory violence by the Iranian regime,” US National Security Council spokesman Garrett Marquis said in an e-mail. “The US will continue to work with our allies and partners to defend our security and interests against Iran’s malign behavior.”
In other energy trading, wholesale gasoline rose US$0.01 to US$1.84 per gallon and heating oil climbed US$0.03 to US$1.89 per gallon, while natural gas fell US$0.04 to US$2.25 per 1,000 cubic feet.
Gold fell US$1 to US$1,425.10 per ounce and silver was unchanged at US$16.12 per ounce, while copper rose US$0.04 to US$2.74 per pound.
Additional reporting by AP
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