Oil shot up like Iran says & # 39; & # 39; It's ready for war & # 39; & # 39;
Oil was awakened by its sleep with another round of escalation between the US and Iran, although the case only increased the importance of the oil markets simply because of a more optimistic economic outlook.
In the early hours of Thursday, Iran shot down an American drone, with both sides reporting conflicting accounts. The United States says the drone was in international waters, while Iran says the drone had entered the Iranian airspace. The incident adds tension to the boiling tension between the two countries.
"This was an untested attack on an American surveillance asset in the international sky," Navy Capt said. Bill Urban, spokesman for US Central Command.
Border are our red lines. Any enemy invading these boundaries does not return [home] said Hossein Salami, chief of the Islamic Revolutionary Watch Corps. "We have no intention of going to war with any country, but we are ready for war."
Early trading on Thursday, the WTI was above 4 percent, and Brent was up over 3 percent, rising to the highest level since late May.
The Trump administration has a confused strategy for Iran, with the ultra-hawk John Bolton and Mike Pompeo in the driver's seat and the slightly more skeptical president Trump giving his advisers. As such, it is difficult to figure out who is calling the shots, and even more difficult to predict what is going on next. While Trump has been more cautious, the Washington Post reported that Pompeo sent a personal warning to Iran that a single attack on a single American everywhere would lead to a military strike. Related: Very Aggressive Clean Energy Bill
But it is important to remember how we came here. Last year, the United States left the unilateral nuclear agreement in 201[ads1]5 and imposed abusive sanctions against Iran, although Iran was in accordance with the terms of the agreement. Then, the United States introduced a list of a dozen relationships that everyone understands as impossible for Iran to face, essentially closing any possibility of a negotiated solution. Earlier this year, even as Iran remains in accordance with the nuclear agreement, the United States sent warships and several troops to the region and attempted to bring Iran's oil exports down to zero.
The Trump administration calls it the "maximum pressure" campaign, and in fact it has caused quite a lot of pressure. Iran has thrown itself, sometimes through proxies, and also through its recent decision to resume the storage of low-enriched uranium. These events are then used to justify the next cycle of escalation. Without a ramp, it is completely incessant that the two nations are on the brink of war. The scary thing is that it is still not an off ramp. Both sides seem locked in, at best, a lengthy summary, perhaps similar to the one that unfolds in Venezuela. Or they will go to war.
Surprisingly, the fast tip in excitement has just shifted the crude oil price into fits and starts the last few weeks. The prospect of a major war, and the potential disruption of the maritime trade in Persia, were largely drawn by oil stocks.
But on Thursday, the oil price showed some signs of life, with the WTI moving back to midway – $ 50s and Brent in the mid $ 60s, the highest price in weeks. The difference this time is that financial and commodity traders have reasons to hope that a serious economic downturn can be avoided. Related: Is Big Oil's Plastic Bet Sun?
The US Federal Bank made a tough position in comments Wednesday. The central bank recognized low inflation and soft business, and while it was observed that the economy was strong, it admitted that "the uncertainty about this view has increased." The bank kept the interest rate unchanged, but loosened some of its language. The financial markets took this as a shift in strategy, and there is a commitment that interest rate increases are offing, perhaps as soon as next month. The stock markets increased on the news.
Meanwhile, the second jolte of positive news came on the trade front. The US and China confirmed a meeting between Trump and Xi Jingping next week in Japan, and trade negotiations will resume in front of the meeting. Trump said on twitter that he had a "very good" call with Xi, and while the puncture points and the trade war are still significant, and the gap between the two sides remains wide, there is at least a glimpse of hope for a resolution.
Of course, the situation is dynamic – Fed interest rates fall on the outcome of trade negotiations. But with some optimism on the economy for the first time in weeks, bearish forces reduced oil. Lastly, it allowed the excitement in the US and Iran to spread back to the forefront, driving up oil prices, at least for now.
By Nick Cunningham from Oilprice.com
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