Oil prices are being tugged in two directions as traders seek to untangle what could be seen as good news for the crude market from the bad.
Tensions in the Persian Gulf between Iran and countries including Britain tend to support prices, given the possibility of an interruption to supply, while worries about a slowdown in global growth undermine the oil price.
Sanctions support oil prices
Yesterday, on 29 July, Brent changed hands at $63.40, while WTI was worth $56.29.
A month earlier, on 1 July, Brent had traded at $65.06 a barrel while WTI was changing hands at $59.09. Go back three months, to 29 April, and Brent stood at $72.04 a barrel and WTI was priced at $63.50.
Twelve months ago, on 30 July 2018, Brent was trading at $74.97, while WTI was worth $70.13.
Escalating tensions in the Gulf have followed America’s revoking of a deal to control Iran’s nuclear ambitions in return for lifting sanctions. The re-imposition of American sanctions has bolstered the price, in tandem with similar sanctions on oil producer Venezuela.
But while the US is by far the most important power in the Gulf, the focus has shifted to Britain in recent weeks as it has found itself in direct confrontation with Tehran. Earlier this month, an Iranian tanker was seized near the British territory of Gibraltar, on suspicion of supplying oil to Syria in breach of sanctions.
“Ferocious naval missiles”
This was followed by the seizure of a British-flagged tanker, the Stena Impero, by Iranian troops.
Already, the UK had a frigate in the Gulf, HMS Montrose, based at the British naval base at Bahrain. This week it emerged that London had despatched a destroyer, HMS Duncan, to reinforce the British presence in the area in terms of escorting British-flagged vessels through a vital international waterway.
The Duncan is a Type 45 destroyer, of which Britain has six. The navy says of these 73,500-tonne vessels: “Equipped with the ferocious Sea Viper missile, which can knock moving targets out of the sky from up to 70 miles away, Type 45 destroyers are the backbone of the Royal Navy.”
It adds that they “are among the most advanced warships ever built…suited to a huge range of tasks, from hunting down pirates to defending the fleet from air attack, or providing humanitarian aid”.
Meanwhile, the 14-nation energy cartel, the Organisation of Petroleum Exporting Countries (OPEC) is hoping that slower growth in some parts of the world will be offset by more rapid expansion elsewhere, thus keeping oil demand on a reasonably even keel. In its July market report, OPEC said it expected global growth next year to remain at the 3.2% expected this year.
It said: “While the US and China are forecast to slow slightly, some severely hit economies – mainly in Latin America and Turkey – are forecast to recover, keeping the GDP [gross domestic product] growth momentum unchanged from the 2019 level.”