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Oil prices on Thursday headed sharply higher, with gains being attributed to the threat of conflict between the U.S. and Iran.
The commodity was extending its advance from the previous session after President Donald Trump on Wednesday in a tweet “instructed the United States Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea.”
Oil has been under an enormous amount of pressure as a pact by the Organization of the Petroleum Exporting Countries and other major oil producers failed to stem a slump in the value of the commodity amplified by the COVID-19 pandemic that has crushed demand for oil.
On top of that, producers are running out of places to store oil, a fact that has also added to price pressures.
“The oil market was looking for something to hold onto after days of painful declines in prices and today found some relief in developments in the US,” wrote Bjornar Tonhaugen, head of oil markets at Rystad Energy, in a daily research note.
“Threats by US President Donald Trump to destroy Iranian gunboats if they harass US navy ships boosted the possibility of renewed tension in the Middle East, a major oil producing region, which traders always translate to reductions in the region’s production and exports if things escalate,” he said.
June West Texas Intermediate crude CLM20, +13.35%, the U.S. benchmark grade, rose $1.56, or 11.3%, at $15.33 a barrel on the New York Mercantile Exchange, but had hit an intraday peak overnight at $16.11, according to FactSet data. The contract surged more than 19% on Wednesday.
June Brent crude BRNM20, +7.56%, the international benchmark, rose $1.41, or 6.9%, to reach $21.84 a barrel, after jumping 5.4% in the pervious session.
The chance of two days of gains for crude has brought some calm to the energy market but commodity traders are uncertain how long the upswing for oil will last without a more lasting solution to the commodity’s storage and oversupply problems.
On Wednesday, the U.S. Energy Information Administration reported that U.S. crude inventories rose 15 million barrels for the week ended April 17 to 518.6 million barrels, marking a 13th straight weekly climb and followed a record weekly increase of 19.2 million barrels a week earlier.
Oil stocks at Cushing, Okla.,, the delivery hub for Nymex futures, rose to 59.7 million barrels last week from 55 million the previous week.
“The storm for oil isn’t over but at least for the time being it is less volatile than the headline-grabbing moves of the last few days,” wrote Carlo Alberto De Casa, chief analyst at ActivTrades, in a research note on Thursday.
“It is clear that any additional cut by OPEC would only be a temporary solution and not a definitive one. Moreover, many producers will struggle with further cuts, even if this seems to be the only alternative to ultra-low prices,” he wrote.
Also see:Why oil crashed into negative territory — 4 things investors need to know
Read: The oil market is running out of storage space and production cuts loom
Steve Goldstein contributed to this article
