Oil shrugs off tanker attacks but the U.S. may not
EDITOR'S NOTE
First, the facts: two oil tankers were attacked around 7 a.m. local time in the Gulf of Oman, which lies off the coast of Iran just below the Strait of Hormuz.
Both were carrying crude products headed for Asia; one operated by Bermuda-based Frontline, and one operated by a Japanese company. This, on the same day that Iran "rebuffed" Japanese leader Shinzo Abe's attempt to ease its tensions with the U.S.
What's more, these attacks come after four other ships (two Saudi tankers and vessels from the U.A.E. and Norway) were attacked a month ago in the Gulf of Oman as they were heading for the Strait of Hormuz. The U.S. said Iran did it, and Iran has denied that. Iran is also presumed by most onlookers to be behind today's attacks.
Now, anytime the Strait of Hormuz is involved in any type of incident, the oil market snaps to attention: a third of the world's shipped oil passes through there. But the reaction has been surprisingly muted. As I type this, both oil benchmarks are barely up 3%. That doesn't even offset their 4% drop yesterday!
Oil prices have been plunging since late April (despite the tanker attacks last month), when the U.S. benchmark was trading over $66 a barrel. Last week, crude nearly slipped below $50. We're around $52.50 today. The drop is a combo of U.S. inventories swelling to a two-year high and the same concern that is dogging other markets: slowing demand.
This isn't your father's or your grandfather's oil market, in other words. Back before the U.S. ramped up its own oil production to rival that of OPEC's, similar events might have shot the oil price up by two or three or four times what we're seeing today.
At the same time, no one seems sure what will happen next between Iran and the U.S. The Treasury Dept. had just announced new sanctions on Iran this week, and Paul Salem of the Middle East Institute, who will join us at 1 p.m. today, says "Iran has responded in the only way it can--by hurting American allies. Regional violence and disruption is their only weapon, and they fully plan on using it."
Iran's goal, Salem says, is to use this pressure to at least get waivers from the U.S. to export its oil for now, and wait things out in the hopes a Democrat will win in 2020 and give them a better long-term deal.
And if the U.S. doesn't give in? Well, that's what I'll be asking about today.
See you at 1 p.m.!
Kelly
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