In this file photo taken on November 30, 2010, a fishing boat is seen entering the harbour in the southern city of Aden, situated at the mouth of the Red Sea. AFP / Karim Sahib
Crude advanced as an attack on Saudi Arabian tankers combined with dwindling U.S. stockpiles helped bulls push oil higher.
Both futures in New York and London rose on Thursday. The geopolitical risk premium in the market crept higher as Saudi Arabia temporarily halted oil shipments via the Bab el-Mandeb Strait after it said two tankers were attacked by Yemeni Houthi militia. Adding fuel to the rally are U.S. Crude inventories at the lowest since 2015 as trade tensions between the U.S. and the European Union are softening.
"These are all really bullish events for the barrel,” said Michael Loewen, a commodities strategist at Scotiabank in Toronto. "The market is starting to realize the geopolitical risk is not going away anytime soon.”
This month, investors have assessed tariff concerns between the U.S. and China and how they might weaken oil demand. At the same time, traders are also looking at OPEC’s pledge to pump more oil and U.S. sanctions against Iran. U.S. policies may weigh on Crude prices in the near term, but that doesn’t represent a reversal in oil’s bull trend with Crude likely to retest $80 a barrel later this year, according to Goldman Sachs Group Inc.
West Texas Intermediate Crude for September delivery rose 44 cents to $69.74 a barrel at 12:33 p.m. on the New York Mercantile Exchange.
WTI second-month futures implied volatility dipped to the lowest level since March after hitting the highest since 2017 earlier this month.
See Also: Bab el-Mandeb, an emerging chokepoint for Middle East flows
Brent for September added 62 cents to $74.55 a barrel on the London-based ICE Futures Europe exchange. Brent traded at a $4.82 premium to WTI. Options on the September Brent contract expire Thursday.
The Bab el-Mandeb Strait, off the shores of Yemen, Djibouti, and Eritrea, connects the Red Sea with the Arabian Sea and is one of the world’s major waterways for Crude oil and other petroleum products. Saudi Arabia can still use its East-West mega-pipeline to transport Crude from its fields in the Persian Gulf to the city of Yanbu on the Red Sea, bypassing the strait and keeping the European market within regular reach.
Other oil-market news:
Gasoline futures climbed 1.3 percent to $2.1502 a gallon.
Saudi Aramco is weighing tapping the international bond market for the first time to finance the acquisition of petrochemical giant Sabic.
OPEC shipments will decline to 24.47 million barrels a day in the four weeks to Aug. 11 versus the period to July 14, tanker-tracker Oil Movements said in a weekly report.
WTI Midland Crude is trading at the lowest level in nearly four years as growing Permian production strains available takeaway pipeline capacity.
ConocoPhillips, the world’s biggest independent oil producer, said it’s boosting its 2018 drilling budget. Marathon Petroleum Corp. and Valero Energy Corp. earned more than analysts expected as margins from processing Crude oil into fuels surged.
