Oil prices edged higher on Tuesday as a tanker fire near the Strait of Hormuz revived geopolitical nerves, offsetting another wave of bearish supply news from Saudi Arabia and OPEC+.
Brent crude rose 0.39% to $72.29 a barrel, while West Texas Intermediate gained 0.26% to $68.84.
The move was modest, but signalled that traders are willing to price in more supply, but not ignore fresh risk around the world’s most important oil chokepoint.
A tanker fire reignites Hormuz nerves
The price lift came after fresh reports of an attack near the Strait of Hormuz.
As per the initial reports, Iran’s Revolutionary Guards fired at least two missiles at commercial ships transiting the strait on Monday night.
Two vessels were significantly damaged, though no casualties were reported.
Separately, the UK Maritime Trade Operations agency said a tanker caught fire after being hit by an unidentified projectile east of Limah, Oman.
AP also reported that the tanker was struck while travelling off Oman near the strait, adding that Iranian state television implied the vessel had ignored Tehran’s warnings, although Iran had not officially claimed responsibility.
That matters because Hormuz is not just another shipping lane. Around one-fifth of global oil consumption passes through the narrow waterway between Iran and Oman.
The strait had reopened to commercial traffic under an interim US-Iran arrangement, but shipping volumes and confidence remain below normal.
Tim Waterer, chief market analyst at KCM Trade, told Reuters that supply recovery had eased the immediate risk premium, but the market remained wary of trusting the current truce too much given the unstable nature of US-Iran relations.
Saudi Arabia and OPEC+ are flooding the market
The reason prices did not jump further is that the supply backdrop is turning increasingly bearish.
OPEC+ agreed over the weekend to raise output targets by another 188,000 barrels per day from August, adding to similar increases for June and July.
At the same time, Saudi Arabia cut the August official selling price for Arab Light crude to Asia to $1.50 a barrel below the Oman/Dubai average.
The $11 monthly cut was the largest in more than two decades.
That is a major signal. Saudi price cuts usually point to weaker demand, tougher competition, or both.
In this case, they also suggest Gulf producers are trying to protect market share as more crude begins moving again after months of disrupted exports.
Robert Yawger, director of energy futures at Mizuho, told Reuters that it was “increasingly looking like the Gulf producers are gearing up for a price war.”
The bearish story does not stop with Saudi Arabia as the United Arab Emirates raised crude output above 3.8 million barrels per day in June, its highest level since April 2020, after leaving OPEC+ production quotas in May.
Abu Dhabi National Oil Company has also been selling crude through tenders at discounted prices.
UBS analyst Giovanni Staunovo said that the recent downward pressure was still being driven by earlier stranded tankers exiting the Gulf, increasing the volume of oil on water.
The post Oil rises as tanker fire near Hormuz offsets bearish Saudi supply signal appeared first on Invezz