Commodities: WTI crude oil price and regional tensions
Oil prices continue to rise as regional tensions in the Persian Gulf escalated on Wednesday. Also, companies started to evacuate their employees from the oil rigs in the Gulf of Mexico. According to the National Hurricane Center storm will strengthen on Thursday. The tropical storm Barry will transform from storm to hurricane today which might disrupt the oil supplies. In the Strait of Hormuz members of the Iranian Revolutionary Guard Corps tried to seize the British tanker.
All of the factors mentioned above played an important role as oil prices reached the highest point in six weeks. The price of West Texas Intermediate (WTI) crude oil increased by 33 cents to $60.76 a barrel. It is the best result for WTI oil price since May 23. Another benchmark which is Brent also increased on Thursday. Brent crude oil rose by 40 cents to $67.41 a barrel. It means that in comparison with Wednesday WTI price rose by 4.5% and Brent oil price increased by 4.4%.
Companies which operate the oil rigs in the Gulf of Mexico evacuated their employee. They made this decision as a precautionary measure ahead of the major storm of the Atlantic hurricane season. On Wednesday, oil-producing companies had to shut down the 32% of oil production as well as 18% of natural gas production in the region. As a result, fifteen production platforms and four rigs stopped working in the North Central Gulf of Mexico. However, analysts believe that it is a temporary measure and it won’t last for a long period of time. Tariq Zahir is a managing member at Tyche Capital Advisors. He thinks that the storm will have a limited impact on oil production. He added that the storm wouldn’t intensify to a severe storm.
The incident in the Persian Gulf and U.S. crude stocks
Another factor that contributed to the rise of oil prices is U.S. crude stocks. According to the Energy Information Administration, crude stocks fell by 9.1 million barrels. Moreover, the EIA report also revealed that gasoline inventories also decreased by 1.5 million barrels last week.
The regional tensions in the Middle East are running high, especially after the UK seized the tanker with Iranian oil on board. Iranian officials described this incident as an act of piracy and threatened to take measures against the UK. Yesterday, the Iranian Revolutionary Guard Corps tried to force the tanker The British Heritage to cross into the Iranian territorial waters. The aim of this operation was to seize the UK tanker as a retaliatory measure. However, the Royal Navy’s frigate intervened, and after some time Iranian boats abandoned their plan. Such incidents threaten the fragile situation in the region.
Oil prices are on the rise. WTI crude oil price reached the best result since May. A tropical storm in the Gulf of Mexico forced oil companies to halt their operations in the region. U.S. crude stockpiles are falling for several weeks. The latest incident in the Persian Gulf with the British tanker is a reminder that geopolitical tensions can affect oil prices.
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