By Adedapo Adesanya
There was a relief for oil prices on Wednesday, April 22 as the market, which had been embroiled in drops, rebounded after the United States President gave order to shoot down and destroy Iranian US ships at sea, re-establishing geopolitical tensions.
Earlier this year, an escalated tension between both nations drove oil prices higher by more than 20 percent, but things went south when the Coronavirus pandemic started spreading from China, where it originated from.
Yesterday, the West Texas Intermediate crude oil, the US benchmark, gained 22.13 percent or $2.57 to trade at $14.14 per barrel. WTI was recovering from its negative territory’s and was up before President Donald Trump’s tweet.
In the same vein, the Brent crude, which is the international benchmark, was higher by 7.97 percent or $1.54 to sell at $20.87 per barrel.
Wednesday’s rebound amid rising geopolitical tensions between the countries came after WTI crude oil for June delivery plunged 60 percent this week amid worries about demand destruction caused by COVID-19 and oversupply brought about by a price war between Russia and Saudi Arabia.
However, President Trump’s warning is set to have a short-term effect on the market as the major problems of low demand, COVID-19, and oil glut still persist in the market, and with economies not fully opening anytime soon, oil prices may yet return to pointing downwards.
“I have instructed the United States Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea,” President Trump tweeted after 11 Iranian vessels last week operated dangerously close to US ships in the Persian Gulf.
Also, on Wednesday, the US Energy Information Administration (EIA) reported that US crude inventories rose 15 million barrels for the week ended April 17 to 518.6 million barrels. This marked a 13th straight weekly climb and followed a record weekly increase of 19.2 million barrels a week earlier.
Saudi Arabia and Russia said on Tuesday they were ready to take extra measures to stabilize oil markets along with other producers, but they have not taken action yet.
Following recommendations by the International Energy Agency (IEA) that there should be extended cut, it is unlikely that this will happen as oil producers had recently cut roughly 10 percent of production.
Dipo Olowookere