Suspension of the Red Sea shipping and US-Europe trade negotiations
US crude oil futures closed higher on Thursday as Saudi Arabia interrupted shipping through the Red Sea Strait. This is the latest sign that the tension in the Middle East has interrupted crude oil transportation, and trade tensions between the United States and the European Union have eased.
NYMEX September crude oil futures rose $0.31, or 0.5%, to close at $69.61 a barrel.
Brent crude oil futures closed up 0.61 US dollars, or 0.8%, to 74.54 US dollars per barrel, the highest closing price in the past two weeks, hitting the highest of 74.83 US dollars per barrel since July 16.
As the world's largest crude oil exporter, Saudi Arabia suspended all oil shipments via the El-Mandeb strait on Wednesday, so two former tankers were attacked by the Iranian coalition Houthi.
Kuwaiti oil officials said the country is studying whether to suspend oil exports through the Mande Strait.
Richard Mallinson, an analyst at consulting firm Energy Aspects, said that crude oil transported through the channel would re-route the Horn of Africa, meaning longer sailing times.
“Traders will realize that this will not cause actual losses to the supply, but will have a knock-on effect on the flow and timing of the crude oil.”
Commerzbank expects about 4.8 million barrels of crude oil and refined oil to enter the Red Sea through the channel every day.
According to the US Energy Information Administration (EIA), in 2016, 4.8 million barrels of crude oil and refined oil are estimated to be shipped daily through Manda Channel to Europe, the United States and Asia.
“The intensity of the supply of crude oil in the Mediterranean and Atlantis depends on the duration of the dispute, which should support the Brent oil price,” the bank wrote in a report.
According to the latest data from the US Energy Information Administration (EIA), US crude oil inventories fell by 6.1 million barrels to 405 million barrels, a decline higher than market expectations, and US gasoline distillate stocks also fell. The data also shows an increase in gasoline demand.
Traders said on Thursday that stocks in Cushing, the US crude oil delivery, continued to fall. Traders cite energy information provider Genscape, which is said to be expected to reduce 1.1 million barrels as of Tuesday.
The oil market was also boosted by the easing of trade tensions between the United States and Europe. US President Trump agreed to suspend automobile tariffs during the US-European negotiations on reducing other trade barriers, and the EU will import more US LNG. Earlier, he met with EU Chairman Jacques at the White House on Wednesday.
John Kilduff, partner of Again Capital Management, said, “Obviously this is good for the economy and commodities. The upcoming trade war has weakened the economic outlook, but the results of the talks have rekindled expectations.”
Michael McDougall, senior vice president of ED&F Man Capital Markets, said that "any progress made by both parties should benefit the global economy and therefore benefit energy prices."
In the refined oil market, the most active September RBOB gasoline futures contract rose 3.15 cents and the settlement price was $2.1166 per gallon.
September heating oil futures rose 2.49 cents and settled at $2.1809 a gallon.
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