Brent oil price surges after attack on two tankers in the Gulf of Oman
Oil prices rallied on Thursday morning after unconfirmed reports of an attack on tankers near the Iranian coast was announced.
Two oil tankers off the Iranian coast were reportedly attacked on Thursday morning, sending oil prices more than 4% higher.
Brent oil prices increased as much as 4.5% shortly after news of the attack broke, before retreating down again. Brent crude sits at $62.10 a barrel, while US Western Texas Intermediate (WTI) hit $52.68, up more than 1.5% as of 11:15 GMT on Thursday.
Attack on tankers fuels fears of further conflict in the Middle-East
The US Navy, which has a base in Bahrain, was quick to respond, sending ships to the scene and assisting the evacuation of the two tankers crew.
According to Iran’s Ports and Maritime Organisation’s website, 44 foreign crew members have been taken to Iran.
The attack comes as tensions between the US and Iran run high, driven by the imposition of an oil embargo on the Islamic Republic by US President Donald Trump.
Trump has imposed sanctions on Iranian oil exports in an effort to support its allies in the Middle East like the UAE and Saudi Arabia who wish to stop Iran gaining further influence in the region.
Japanese Prime Minister Shinzo Abe is visiting Iran in the hope of reducing tensions between the two countries, with onlookers hoping that Tokyo can open up talks with officials in Tehran and Washington.
The Kokuka Courageous, one of the oil tankers that was attacked and belongs to Tokyo-based Kokuka Sangyo, was reportedly hit by two shells.
'The first shell hit to the rear of the ship on the port side. A fire in the engine room was extinguished with carbon dioxide,’ a Kokuka Sangyo official said at a press conference. ‘The second shell then hit port amidships and the captain decided to evacuate.’
Technical Analysis
The pathway for Brent crude has been a relatively consistent one over the past month, with price breaking into a five-month low. Those declines came off the back of a bearish reversal signal in late-May, with price failing to sustain the creation of higher lows and highs.
Now we are seeing the potential for an opposing move, with the inability to break through the $59.23 support level providing a tentative signal that we could be in for some period of upside. However, this is just the first part to that potential bullish story, with a break through the $63.49 swing high required to negate the recent downtrend.
However, on an intraday basis, we can see that the initial surge seems to be easing back as momentum fails to follow through. The slowing stochastic oscillator appears to be closing in on a bearish cross as it approaches the overbought zone.
Given the recent rally into trendline resistance, the ability to remain below the $62.22 peak from this morning is key to maintaining a short-term bearish view. The wider downtrend remains intact as long as we remain the $63.54 peak, and while there is a distinct possibility that we could see another escalation to the situation, that uptrend is expected to resume for now.
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