The price of a barrel of Brent crude oil has climbed by more than nine percent to $22.25 (ICE) on Thursday amid renewed military tensions between the US and Iran.
Brent crude prices had fallen by more than 50 percent over the last week, reaching its lowest level since June 1999. The dramatic drop came as concerns mounted that crude storage tanks are running out of space.
On Wednesday, US President Donald Trump had warned that the US Navy would attack Iranian gunboats if they “harass our ships at sea,” reigniting fears of a conflict in the Persian Gulf.
West Texas Intermediate (WTI) had similarly plunged to a negative price for the first time in its history on Monday. The price has since recovered as well, growing to $15 per barrel (Nymex).
Trump’s threat to “shoot [Iran’s boats] out of the water” came a week after the Pentagon claimed 11 Islamic Revolutionary Guard Corps Navy (IRGCN) boats had conducted “dangerous and harassing approaches” to US ships conducting drills in the Persian Gulf.
Last year, oil prices surged to multi-year highs amid growing tensions between Washington and Tehran, following drone attacks on Saudi oil fields which disrupted production of 5.7 million barrels per day and which the Trump administration blamed on Iran.
The global oil markets have been experiencing a glut due to a steep drop in demand amid the Covid-19 pandemic. Talks between major oil producers, including Russia, the US and Saudi Arabia, earlier this month yielded plans to cut 10 million barrels a day — but that still leaves about 17 million barrels in overproduction daily.
The situation has led some analysts to speculate that Washington may see conflict with Iran — which would close the Strait of Hormuz and shut down production in the Persian Gulf — as a way to quickly remove that excess from the global economy and save US oil producers in the process.
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