Oil prices have been fluttering over the past few months, rising and falling for a variety of reasons. The main factor that has gripped international oil markets currently is the geopolitical situation in the Persian Gulf.
As tensions between the U.S. and Iran grow amidst a fresh wave of oil tanker attacks, U.S. oil prices in particular saw the best single day gain so far in 2019.
Oil futures shot up on Thursday, ending the day at their highest settlement this month as well as their biggest one-day gain so far in the year. Coupled with the fact that Iran shot down a U.S. military drone, fears of a deepening conflict and potential disruption to oil supplies have been growing.
Prices of U.S. benchmark West Texas Intermediate crude shot up 5.8 percent, ending the day at $56.65 per barrel on the New York Mercantile Exchange. The last time oil shot up by that much was December 26, 2018. International benchmark Brent crude shot up $2.63, or $4.3 percent, ending the day at $64.45 per barrel, which is the best single day climb since January 9th.
“Nothing but bullish news in the last 24 hours,” said Scott Gecas, chief market strategist at Walsh Trading. “If the [Middle East choke point] Strait of Hormuz is impacted by escalating tensions, [that] will impact global supply quickly.” Another analyst, Edward Moya, added that “Iran is showing they are still able to rattle oil markets and the downing of a U.S. drone is the latest escalation. Oil prices are out of bear market territory and appear well supported here.”
Oil tanker attacks have been a thing of the past for the most part until recently, where last month say a couple of tankers in the Strait of Hormuz fall under attack. Since then, a fresh wave of attacks took place in the area. The U.S. has blamed Iran for the attacks on the ships, claims that the country denies. Just today, President Donald Trump doubled down on these sentiments, tweeting today that “Iran made a very big mistake.”
Prior to this recent surge, prices for oil have been tumbling as domestic output of crude in the U.S. continues to grow. On Wednesday, the U.S. Energy Information Administration reported that crude supplies, for the first time in a long while, fell by 3.1 million barrels after two weeks of every day increases. This was substantially more than what most experts were expecting, which was a decline closer to only 1 million barrels.
Additionally, OPEC and its allies announced they would be holding meetings in early July on the current state of oil prices. OPEC’s initial supply cuts made earlier in the year was the main cause of the initial surge in oil prices seen so far until America’s output began to surge.
Since then, it’s anticipated that OPEC will issue a new round of supply cuts, but with current tensions rising, they might abstain from making this decision as long as prices continue to rise.
July natural gas prices fell by around 4 percent, while heating oil and gasoline rise by around 2.9 and 3 percent respectively.