By Barani Krishnan
Investing.com – Oil prices moved higher Friday on reports that Iran had seized a British-flagged oil tanker in the Strait of Hormuz.
The August contract briefly crossed above $56 a barrel before falling back by the settlement in New York. WTI settled at $55.63, up 33 cents. . the global benchmark, settled up 54 cents to $62.46 in London after hitting a high of $63.32.
It was not clear why the Iranians seized the tanker; the state-run media said it was for violations of international regulations.
But the move injected more uncertainty into global oil markets already struggling for direction in the face of near-constant Middle East tensions and fears of global supply gluts.
Despite the reports from the Strait of Hormuz, which connects the Persian Gulf to the Indian Ocean, oil prices fell more than 7% on the week, their worst performance in seven weeks.
The tanker seizure is just one more element in the tension-fraught relationship between the Trump Administration and authorities in Tehran. Almost any event can result in “swift policy changes,” New York-based Energy Intelligence said in its Petroleum Intelligence Weekly. “Phases of escalation followed by renewed peacemaking efforts would appear a likely pattern.”
Both Washington and Tehran had indicated in recent weeks that despite the grandstanding and hostilities aimed at each other the past year, they want to resolve their more-than-year-long standoff.
In a Thursday news conference at the Iranian mission to the United Nations, Foreign Minister Mohammad Javad Zarif suggested that President Donald Trump’s sanctions on Tehran’s oil and leaders be removed so that the two sides could talk.
Analysts believe that Zarif’s call will almost certainly be rejected by the Trump administration. For there to be talks, there should be no preconditions, Washington says. And in between all these, a U.S. warship in the Strait of Hormuz reportedly destroyed an Iranian surveillance drone on Thursday. But Tehran quickly denied losing any of its surveillance planes to Washington.
While it’s unlikely that Trump would agree to set aside all the sanctions he’s built against Iran’s oil and its leaders in order to bring Tehran to the negotiating table, it’s possible that he could meet Iran’s demands half-way. Trump could suspend his most objectionable sanctions against the Islamic Republic for a specified period – say three months — to give the peace process a chance.
Investing.com’s projections are that the price of WTI and will fall about $5 a barrel within a week or two of the announcement that the two sides are ready to talk. And every rebound thereafter will be checked by the possibility of an impending Iran Nuclear Accord 2.0.
Earlier in the week, Trump said a trade deal with China might not happen right away and that he considering heavier tariffs against Beijing, which did not buy U.S. farm products as expected. Any negative news on China tends to hurt oil prices as well.
Crude has also fallen over the past week compensating for overruns in estimates for the damage from Hurricane Barry.
Barry, which came ashore in central Louisiana on Saturday as a Category 1 hurricane, promptly weakened into a tropical storm. Oil companies have since reopened their platforms in stages, pressuring prices.
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