Oil spikes on Iranian tanker blasts

Agence France-Presse . London, United Kingdom | Published: 00:00, Oct 12,2019

 
 

Oil surged on Friday after an Iranian tanker was hit by suspected missile strikes off the coast of Saudi Arabia, sparking fresh conflict fears one month after attacks on Saudi oil facilities that were blamed by Washington on Tehran.

The National Iranian Tanker Company, which owns the ship, revealed that the hull of the Sabiti was hit by two separate explosions off the Saudi coast, saying they were ‘probably caused by missile strikes’.

Brent and New York crude contracts were catapulted more than two per cent higher as the news flashed across traders’ screens just after 06:00 Greenwich Mean Time, ratcheting up geopolitical and supply tensions in the crude-rich tinderbox Gulf region.

‘This clearly puts fuel on the Middle East fire,’ SEB commodities analyst Bjarne Schieldrop told AFP.

‘After the attack on Saudi a few weeks ago, it’s not a matter of if we get new comparable events — but when, and how much.

‘And here we are. Great strategy by Saudi if they are behind the attack on the oil tanker.’

‘No one can directly blame them because we do not 100 per cent know it was them. Just as with the attack supposedly by Iran or Yemen on Saudi.’

‘More of the same to come both ways before Iran/Yemen fundamental issue is solved. One cannot assume full Saudi production next year before issues are solved as renewed outages ... will happen again and again.’

The September 14 attacks on Aramco plants in Abqaiq and Khurais — which initially halved the kingdom’s crude output — had also set the market alight.

Washington concluded that the September strikes were launched from Iranian soil and that cruise missiles were used, but Tehran denies involvement. The attacks were claimed by Yemen’s Huthi rebels.

Friday’s blasts could escalate quickly and spell more global economic turmoil, according to Nordea Markets analyst Thina Margrethe Saltvedt.

‘The risk premium is rising following the attack on the Iranian oil tanker, not because the tanker per se contains enough oil to squeeze the market, but the risk that this incident will be retaliated or more attacks would come either in Iran, Saudi Arabia or Iraq,’ Saltvedt told AFP.

Prices could spike even higher in the event of a ‘major up-scaling’ in military activity — and ‘especially if we see any more drone or military attacks on oil installations in the area’, she warned.

Saltvedt added: ‘The prices might move up sharply — the sky is the limit in these worst case scenarios.’

‘If major oil installations are destroyed then oil prices can stay higher for longer, and weigh on global economic growth as the price on fuels and thereby the cost of transporting goods will rise sharply.’

Prior to the news, crude had already been rising on signs of progress in the US-China trade talks and after OPEC secretary-general Mohammad Barkindo said the oil exporting club would do what it could to avert another slump.

Elsewhere, Asian and European equities were enjoying strong buying thanks to hopes of progress in the talks, with US president Donald Trump saying they were ‘going very well’.

Negotiators from the world’s top two economies kicked off much-anticipated talks on resolving their long-running tariffs row on a positive footing.

In foreign exchange, the pound hit a five-month peak against the euro after British prime minister Boris Johnson and his Irish counterpart Leo Varadkar declared on Thursday that they could see a ‘pathway’ towards striking a possible Brexit divorce deal.

British and EU negotiators met on Friday in a last-ditch bid to restart talks on an orderly Brexit, amid ‘promising signals’ that a deal could still be possible just days before a key EU summit.

The European single currency sank as low as 87.84 pence in late morning deals.

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