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Worrisome news out of the Middle East, as well as promising news about China, may be pushing oil prices up.
“All of a sudden, you’ve got a pretty explosive market, and you’ve seen that in the prices over the past couple of days,” said market analyst Phil Flynn.
This week, as Iran has threatened terrorist attacks against U.S. interests in the Middle East, and against its oil-producing neighbors, the price of a barrel of oil has inched up to its highest level since early April.
“Iran is already threatening to attack its neighbors,” Flynn observed. “So Bahrain and Kuwait and all those key oil-producing countries are under alert, and we’ve seen that in the prices over the past couple of days.”
Oil prices took another jolt when President Trump announced that some American personnel and their families were being moved out of the Middle East. “It could be a dangerous place,” the president said.
The map of the region makes the danger obvious, as oil shipments move out of the vast Persian Gulf into the Indian Ocean, through one small bottleneck.
“The Strait of Hormuz, that’s a key chokepoint,” Flynn said. “20 percent of the world’s oil supply goes through there. That’ a big risk, because it’s right on Iran’s border. So, oil prices have to reconfigure the risk to supply. And we’re seeing that.”
“The Strait of Hormuz, that’s a key chokepoint,” Flynn said. “20 percent of the world’s oil supply goes through there. That’ a big risk, because it’s right on Iran’s border. So oil price has to reconfigure the risk to supply. And we’re seeing that.”
Ironically, some good news has also meant rising prices. The potential for disruptions in oil supply came along with signs of increases in demand as the Trump administration indicated signs are promising for a trade deal with China. Such a deal could enhance economic growth and create more demand for energy.
If there are disruptions, Flynn said American oil producers should be able to handle them better now than in the past, thanks to the more energy friendly policies of the Trump Administration.
“The oil industry is going to be able to react quicker than ever to this type of situation, because they’re not going to be bogged down in regulations and approvals,” he said.“So I think the U.S. is in a better situation to respond than they would have been before.”