(Kitco News) – Oil prices rose sharply after Iran seized a tanker with Iraqi crude destined for Turkey on Thursday morning, prompting concerns that the move could stoke tensions and lead to a broader conflict in the region.
Iran said the seizure was in response to the confiscation of the same vessel and its oil by the United States last year. At the time, Iran warned the U.S. that the move would “not go unanswered.”
“After the theft of Iranian oil by the United States last year, St Nikolas tanker was seized by Iran’s Navy this morning with a judicial order … it is en route to Iranian ports,” the Iranian Fars news agency reported, citing a statement by the Navy.
The seizure of the Marshall Islands-flagged St Nikolas comes after weeks of drone and missile attacks by Yemen’s Iran-backed Houthi militants against shipping vessels in the Red Sea.
The ship was carrying 145,000 metric tonnes of oil from the Iraqi port of Basra to Aliaga in western Turkey via the Suez Canal. The vessel was manned by a crew of 19, which included 18 Filipino nationals and one Greek national, according to the operator.
John Weyer, Director of the Commercial Hedge Division at Walsh Trading, said that while the move has sparked a run-up in oil prices on the daily charts, it hasn’t changed the fundamental situation, and the impact on energy and other commodities prices will be muted.
“Looking at the big picture, we’re trading a range here,” he said. “It’s hard for a lot of us to grasp day to day, but we’re rangebound between $76 and the $68, $69 mark, with the bulk of the trading coming between $71 and $73.”
“Oil is really a demand-driven market,” he said. “I don’t know if we’re reading the tea leaves a little bit, the CPI numbers here, that might have this up a bit, but I think it’s not anything really to be worried about.”
“We’ll probably run into resistance when we get up towards that $76 area, but we haven’t put in any significant moves on the technical, we’re trading within a range,” he said. “It’s a nice big move today, but in the longer term, over a month or so it’s not doing anything out of the ordinary.”
Weyer said that $76 is the near-term resistance for WTI crude, but even if bulls make a push and get above $77, those levels haven’t been sustained recently. “The one thing a lot of people who’ve been following oil for years are having a hard time with is the supply numbers,” he said. “The U. S. domestically is producing more than ever, and even with all that’s going on, recent events with the Middle East and Ukraine, supply routes remain open. We haven’t had an interruption of supply of any significance. That’s probably keeping us from running up further.”
“You could see WTI dragged up a bit, but I think you’re going to have to have some serious interruptions to go from $80 to $100, or above $90.”
WTI crude oil was trading as low as $71.19 per barrel in the early morning hours before news of the tanker seizure broke, and it rose to a high of $73.77 per barrel just before 11:30 am EST, but it has since pulled back to the middle of its daily range.
At the time of writing, WTI crude was trading at $72.66 per barrel, up 1.89% on the session.
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