A tanker attack in the Middle East revives geopolitical fears and put a premium back in oil prices.
"You're in the $60s or $80s If it's all about trade wars, the economy is tanking," said Helima Croft, head of global commodities strategy at RBC. "That's the binary nature of this market." She said a major geopolitical incident could drive the price of Brent as high as $80, especially if trade worries dissipate.
The two ships that were attacked were the Kokuka Courageous, a chemical tanker that was loaded in Saudi Arabia, and was enroute to Singapore, and the Front Altair. The Front Altair was carrying a cargo of naptha, a petrochemical feedstock, from the Persian Gulf to Japan. "It is a factor that the market sell-off has ignored," said Morse. "The world is fairly fragile, and we could see a higher probability of a drop in production generated by political events, rather than by economic tightness, and it could be Iran. It could be Iraq. It could be Libya. It could be Nigeria. It could be Venezuela."
There have been a number of other attacks recently, including a missile attack Wednesday that struck the arrivals hall of an airport in southwestern Saudi Arabia, injuring 26 people. Houthi rebels were said to be behind that attack and others. Last month, a drone attacked a Saudi oil pipeline, temporarily putting it out of commission. The Houthis, said to be backed by Iran, have been fighting Saudi Arabia in Yemen, after driving out the Yemeni government in 2015.
Iran has threatened to walk away, if there's no resolution by July 7. It could then return to enriching uranium, at levels closer to weapons grade.The incident occurred as Japanese Prime Minister Shinzo Abe was in Tehran, conducting talks in an effort to cool tensions between Iran and the U.S.
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