Oil tankers ablaze in the Gulf of Oman and the US pointing the finger at Iran should be enough to send the price of the world’s most vital commodity skyrocketing.
Instead, oil prices have barely budged. Traders are not buying into the theory that Tehran wants a war, but they are worried about demand.
Dated Brent assessed by S&P Global Platts – the world’s most important oil benchmark – spiked by over 4% following the attacks on June 13 and traded briefly just above $62/b. On the face of it, this modest rise doesn’t reflect the risk to almost a fifth of the world’s oil shipped through the Strait of Hormuz, a narrow 21-mile-wide channel separating Iran from the Arabian Peninsula.
“I see the limited reaction in the crude oil market as an indication of traders saying ‘hang on a minute’,” said Ole Hansen, head of commodity strategy at Saxo Bank. “If Iran did this it would be an open invitation to the US to step up its involvement and that should have sent the price much higher.”
Supporting Hansen’s point, crude had futures tumbled earlier in the week, with Brent falling below $60/b for the first time since late January, after data showed a larger-than-expected increase in US crude oil inventories.
The combination of rising stockpiles, tepid demand growth and fears of a slowing global economy has been enough to wipe $13 off the value of a barrel of Brent crude since May, despite the recent attacks on oil shipping and infrastructure in the Middle East.
Last week’s attacks were described by US Secretary of State Mike Pompeo as “an unacceptable campaign of escalating tension by Iran”.
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