Oil prices continued to rise on Friday. The decisive factor, however, was not easing of weakness in demand and excess supply, rather political tensions between the USA and Iran led to rising risk premiums for crude oil.
After an incident on the open sea, US President Donald Trump instructed the Navy on Wednesday to destroy Iranian ships should they stand in the way of American ships. Iran reacted sharply on Thursday with counter threats. Relations between the United States and oil-rich Iran have long been under strain.
In Asian trade, a barrel (159 liters) of the North Sea type Brent last cost $ 22.48. That was $ 1.15 more than the previous day. The US variety WTI was traded at $ 17.70 per barrel. It was $ 1.20 more than on Thursday. By contrast, oil prices on Monday and Tuesday still collapsed. The stock markets were also heavily burdened by this, as concerns about the US energy sector are associated with the price collapse.
After the stock market recovered somewhat as oil prices rose, US Treasury Secretary Steven Mnuchin recently announced that he was considering a loan program for the country’s troubled oil industry. According to those familiar with the matter, the loans would be provided through the Fed. However, the instrument is only one of several options: “We haven’t decided yet,” said Mnuchin.
Despite the current recovery, the enormous supply overhang in the crude oil market remained unbroken. From the perspective of market observers, this will also continue, which is why oil processors recently had a race for freight capacity on ships to store excess petrol and kerosene. Pipeline operators also tried to create more storage space.
With no light visible at the end of the tunnel, the market is preparing for a sustained weakness in demand that will change the oil industry. As the World Bank announced, it expects the weakest recovery in history after the slump in the oil market.
Market observers are initially hoping for a phase of relative stability with the production cuts beginning on May 1, which have been agreed by leading oil nations. The start of the cuts was “very constructive,” said Michael McCarthy, strategist at broker CMC Markets Asia Pacific. It appears that the average price for WTI will range between $ 15 and $ 20 a barrel in the near future.
Source: Apa / dpa
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