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Oil prices surge after suspected tanker torpedo attack near Iran

Tension in the Middle East increases as two tankers in the Gulf of Oman near Iran and the Strait of Hormuz are attacked.

Oil prices jumped more than 4% on Thursday after a suspected attack on two tankers in the Gulf of Oman near Iran and the Strait of Hormuz, through which a fifth of global oil consumption passes.

The Marshall Islands-flagged Front Altair carrying naphtha and the Panama-flagged Kokuka Courageous carrying methanol have been evacuated and the crews are safe.

The charterer of the former said the vessel was “suspected of being hit by a torpedo”. Its owner said it was on fire. The manager of the latter said it had been damaged as a result of a “suspected attack” but that its cargo was intact.

The incident followed last month’s sabotage attacks on vessels off the Fujairah emirate, one of the world’s largest bunkering hubs.

Brent crude futures were up $2.19, or 3.65%, at $62.16 a barrel by 1341 GMT, having risen as much as 4.45% to $62.64.

US West Texas Intermediate crude futures were up $1.79, or 3.5%, at $52.93 a barrel. WTI earlier rose as much as 4.5% to $53.45.

“This is a fairly small increase given the uncertainty and the potential knock-on effects of attacks such as these. This partially reflects the fact that the oil market has already priced in the supply and geopolitical risks emanating from Iran,” said Cailin Birch, economist at The Economist Intelligence Unit.

“However, it also reflects market concerns that the continued US-China trade war will weigh on economic activity, and therefore oil demand growth, in the world’s two largest economies.”

Both crude benchmarks are set for their biggest daily rises since early January, but they are nevertheless headed for a weekly loss.

Oil prices had slumped in the previous session on an unexpected rise in US crude stockpiles and a dimming outlook for global oil demand.

The Bahrain-based US Navy Fifth Fleet said it was assisting the tankers after receiving distress calls following “reported attacks”. The United Kingdom Maritime Trade Operations, part of the Royal Navy, said it was investigating.

Iranian search and rescue teams have picked up 44 sailors from two damaged tankers in the Gulf of Oman, the Islamic Republic News Agency reported.

UPDATE Ships tracks and May 12 attacks added to the map. Map locating the two tankers hit in suspected attacks in the Gulf of Oman on June 13, 2019

US National Security Adviser John Bolton said on May 29 that naval mines “almost certainly from Iran” were used to attack the tankers off the United Arab Emirates last month, and warned Tehran against conducting new operations.

Tensions in the Middle East have escalated since US President Donald Trump withdrew from a 2015 multinational nuclear pact with Iran and reimposed sanctions, notably targeting Tehran’s oil exports.

Iran, which has distanced itself from the previous attacks, has said it would not be cowed by what it called psychological warfare.

Also supporting oil bulls were signs that OPEC members were close to agreeing on continued production cuts.

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A torpedo attack can be a submarine? If so then some country’s navy did this.

Obviously…. Now the question is whose….
Iran?? …. But why would they do that…. Anybody doing this would know this would have an effect on increasing the oil price…… Why would Iran want to do that and help there enemy the Saudis out??…. Unless this is the work of the Saudis themselves as an out of the box way of driving that oil price back up into the 70s.

Torpedos can be launched from ships, submarines, aircraft, small boats and remotely. The damage looks too small for a torpedo. Torpedos usually carry about 450kgs of explosive. I was expecting a bigger hole. It was probably a limpet mine, or two.

Ally Cat’s comment is correct though. Only the Saudi’s and their allies would benefit from an increased oil price.

In other news, a US video apparently shows attacks are Iranian. Follow the money, I say…

The glut of oil coming from the US is what is pushing oil prices down. The trend is going to continue for the foreseeable future. To push the price of oil up will require an attack on the US oil production and supply systems.

Attacking the ships in the Strait of Hormuz benefits only one nation: Iran. By covertly disrupting the transportation of cargo around a chokepoint it may create sufficient international pressure on the US to rejoin the 5+1 pact and lift oil sanctions against Iran. No other stands to benefit.

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