Investing.com – The fear of the unknown is greater than the known.
And the scant facts behind the latest oil tanker attack in the Middle East were enough to send alarm through global oil markets on Thursday. That has helped crude futures recover after the sharp losses of the previous session caused by dismal U.S. data.
U.S. West Texas Intermediate crude futures settled up $1.14, or 2.23%, at $52.28 per barrel. WTI rallied as much as 4% earlier, matching what it lost on Wednesday.
Futures of Brent, the U.K.-traded global benchmark for oil, settled at $61.31 a barrel, up $1.34, or 2.23%. Brent also jumped as much as 4% earlier. It had fallen 4% on Wednesday, closing below the $60 per barrel support level for the first time since January.
Thursday’s crude rally came astwo oil tankers were attacked and left adrift in the Gulf of Oman, stoking fears of a new confrontation between Iran and the United States.
According to reports, the tankers had been loaded in Saudi Arabia and the United Arab Emirates. They were hit just off the coast of Iran near the Strait of Hormuz, a major strategic waterway through which a fifth of global oil consumption passes from Middle East producers. Coming after attacks on four tankers near the Persian Gulf last month, the news raised concerns over potential disruptions to oil flows.
It wasn't clear who was responsible for the latest hit. U.S. Secretary of State Mike Pompeo accused Iran for the attacks, calling the Islamic Republic "a threat to international peace and stability". An Iranian official was quoted saying by BBC that Tehran had "nothing to do" with the attacks.
Russia also said no one should rush to conclusions or use the incident to pressure on Iran. In last month’s attacks, U.S. National Security Advisor John Bolton blamed Tehran, which is under the Trump administration’s sanctions for the export of its oil. Tehran denied the accusation. Moreover, the crew from one of the tankers hit on Thursday was saved by an Iranian rescue boat.
“In my opinion, this is significant news and should not be faded though it’s not very impressive that we have yet to even surpass yesterday’s losses,” said Scott Shelton, energy futures broker at ICAP (LON:NXGN) in Durham, N.C. “Get ready for lots of misinformation and media coverage that know very little about oil which will only add to the volatility.”
Crude had plunged nearly 4% on Wednesday after a surprisingly large increase in U.S. oil inventories spurred further concerns over the state of demand in a weakening world economy.
Oil had its worst monthly performance of 2019 in May as traders shifted their focus from tightening supply (in the form of OPEC-led output cuts) to weakening demand, exacerbated by concerns that the ongoing trade dispute between the U.S. and China will dent the global economy.
Traders were also pondering about the direction for oil after OPEC on Thursday cut its outlook for global demand growth this year from 1.21 million barrels per day (bpd) to 1.14 million bpd. The cartel noted that “significant downside risks from escalating trade disputes spilling over to global demand growth remain.”
In paring demand for its own oil, OPEC joined the U.S. Energy Information Administration’s move earlier this week to forecast lower global demand. The International Energy Agency will likely follow suit when it releases its own monthly report on Friday.
Ellen Wald, president of Transversal Consulting and an Investing.com contributor, suggested that oil market’s obsession with a potential demand collapse may be overdone. She cited a report by BP that revealed that growth in energy consumption was nearly double the 10-year average rate.
“The BP (LON:BP) report should remind market watchers that even though organizations and banks are cutting their forecasts for oil demand growth in 2019, the world still needs energy in general - and more of it,” she said.