The fear factor over possible supply disruptions stemming from escalating tensions in the Middle East put upward pressure on prices this week as word surfaced that Iran had seized an ‘oil tanker’ sailing near its waters, then fell when Washington showed signs of loosening its grip over Iran sanctions when it named dovish Rand Paul to liaison with Iran for a possible resolution.
And just to ensure that tensions remained balanced, Trump said the US ‘shot down’ an Iranian drone on Thursday. But speculators will remain guessing with a multitude of reports contradicting this. They range from the US having jammed a drone, rather than shooting it down, causing it to be destroyed, to Iran denying the loss of a drone at all and then saying it might have shot down its own drone by mistake.
But there is less ambiguity when it comes to oil fundamentals. The market is capping both gains and losses as it grows increasingly numb to the unrest that is now practically commonplace. What persists is the perception of a global crude oil glut.
In the US, both crude oil and gasoline inventories are 4% and 2% above the five-year average for this time of year, and crude production in the US is on an upward trend, at 12.3 million bpd, just 100,000 bpd under the all-time high.
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