WTI rallies hard to test $ 57 mark on escalating Gulf tensions
- Rising UK-Iran geopolitical tensions risk supply disruption, oil jumps.
- Stronger USD, Libyan output resumption to limit the gains?
- Next of relevance is the US supply report, as the focus stays on trade and geopolitics.
The latest upsurge in WTI (futures on Nymex) gained further traction in the European session, as the oil bulls take on the 57 handle, supported by the supply disruption concerns amid escalating Gulf crisis.
Last week’s seizure of the two British tankers by Iran in the Strait of Hormuz further fuelled the already rife Middle East tensions, with the UK now weighing responses to the issue with few good options. Mounting Gulf tensions threaten supply disruption, as the Hormuz Strait is oil’s key trade way.
However, the gains appear limited by a broadly stronger US dollar, as markets price-out a 50bps Fed rate hike next week. A stronger greenback makes the USD-sensitive oil expensive for the holders in foreign currencies.
Further, the resumption of the output at the Libyan main oilfield, Sharara, also weighs in on the black gold’s latest upmove. “The Sharara oilfield resumed production at half capacity on Monday after being shut down since Friday, which caused an output loss of about 290,000 barrels per day (bpd),” Reuters reports.
Looking ahead, markets await some clarity on the US-China trade talks and the US weekly crude supplies report for fresh impetus while Gulf tensions will continue to remain the main driver.
Levels to watch