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Oil Prices Rebound After Attacks On Tankers

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BY BUKOLA IDOWU, Lagos

Oil prices rebounded as two tankers were damaged in a suspected attack in the Gulf of Oman, just weeks after a previous incident in the region.

Crude in London and New York soared as much as 4.5 per cent following reports of an assault on ships near the Strait of Hormuz, a critical passage for cargoes from the Middle East. The Japanese owner of one vessel told local media it was hit by a “shell.” The second tanker, owned by Norway’s frontline, suffered three detonations, the Norway Maritime Authority said. Both ships were evacuated.

The incident comes just a month after four vessels, including two Saudi oil tankers, were sabotaged in what the U.S. said was an Iranian attack using naval mines. Tehran denied the charge, and nobody has claimed responsibility for the latest assault.

Tensions have flared in the region as U.S. President Donald Trump attempts to choke off Iran’s oil revenues with tighter sanctions, and turns to the Islamic Republic’s political adversaries — the Saudis — to keep global crude markets adequately supplied. The alarm is reviving prices that have faltered for weeks amid the U.S.-China trade dispute and swelling American inventories.

“In the past weeks, the market has been in a panic about the perceived weakness in oil demand,” said Eugen Weinberg, head of commodities research at Commerzbank AG. “We’ve been wondering what piece of news would break the dam, and lead to a jump in prices.”

Two suspected attacks on tankers at the mouth of the Persian Gulf This latest incident could set the stage for a tense meeting when the OPEC cartel — to which both Saudi Arabia and Iran belong — and its allies gather in coming weeks to decide oil-production levels for the second half of the year. The group has been struggling to settle on an exact date as the Saudi-Iran dispute once again impedes its ability to make decisions.

Brent for August settlement advanced 3.9 per cent to $62.28 a barrel on London’s ICE Futures Europe Exchange at 1:50 p.m. local time, after touching $62.64 earlier. It fell 3.7 per cent on Wednesday to the lowest in almost five months. The global benchmark crude traded at a premium of $8.97 to West Texas Intermediate for the same month.

WTI futures for July delivery gained $1.85, or 3.6 per cent, to $52.99 a barrel on the New York Mercantile Exchange. Prices slumped four per cent on Wednesday as U.S. government data showed crude stockpiles expanded by 2.2 million barrels last week.

Frontline’s Front Altair tanker was carrying naphtha from the Persian Gulf to Taiwan. The second, smaller tanker, the Kukoka Courageous, was shipping methanol to Singapore. The U.S. Navy said its ships were in the area and rendering assistance.

Meanwhile, the Organisation of Petroleum Exporting Countries (OPEC) says it has cut its forecast for global oil demand growth and warned of potential further cuts as international trade disputes continue to fester.

OPEC said in its monthly report published on Thursday that world oil demand would rise by 1.14 million barrels per day (bpd) this year, 70,000 bpd less than previously expected.

“Throughout the first half of this year, ongoing global trade tensions have escalated,” OPEC said in the report.

It added that the potential for these disputes to affect global demand poses “significant downside risks”.

OPEC and its allies will meet in the coming weeks to decide whether to maintain supply curbs, with some having become alarmed by a steep slide in prices.

U.S. President Donald Trump has pressed for action to lower prices. Observers see the cut as building a case for prolonged supply restraint over the rest of 2019.

OPEC, Russia and other producers have, since Jan. 1, implemented a deal to cut output by 1.2 million bpd. They will meet over June 25 and June 26 or in early July to decide whether to extend the pact.

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