Oil Market Update - May 13

[dan_s]

Traders are spooked by the "noise" coming out about the U.S. / China "Tariff War".

Phil Flynn at 12:00 PM ET on May 13

Sabotage: Reuters reports that the UAE said on Sunday that four commercial vessels were sabotaged near Fujairah emirate, one of the world’s largest bunkering hubs lying just outside the Strait of Hormuz but did not describe the nature of the attack or say who was behind it. The UAE had not given the nationalities or other details about the ownership of the four vessels. Riyadh has identified two of them as Saudi, and a Norwegian company has said it owned another. Details of the fourth ship were not immediately clear.

Iran, which is embroiled in an escalating war of words with the United States over sanctions and the U.S. military’s presence in the region, moved to distance itself on Monday. Iran’s Foreign Ministry called the incidents “worrisome and dreadful” and asked for an investigation into the matter, Reuters said.

This attack raises the stakes for oil and will add more volatility. Yes, trade war concerns can have an impact on demand down the road, but geopolitical events can impact oil supply now. This is very true especially against the growing threat from Iran.

As I wrote for the Fox Business Network website last week “in the past the market has taken grandiose threats from Iran to close major oil routes with a grain of salt, the Trump administration is now taking them seriously. If Iran closed the Strait of Hormuz it would lead to an immediate military response, not only by the U.S. but by the rest of the world.

This waterway is so critical for the global economy; the world would have no choice but to respond. Even if this waterway was shut down just for hours, it more than likely would cause a major oil price spike. According to the Energy Information Administration’s latest data, the strait accounts for 30 percent of all seaborne-traded crude oil and other petroleum products. The loss of that supply because of military action would cause panic, and while it is doubtful the Iranian military has the ability to keep the strait closed for an extended period of time, it might not matter because the oil price spike would have already happened. The damage to consumers wallets, as they say, would already be done.”

Add this to the lower output from Venezuela and the OPEC cuts, we are seeing increased price risks to the upside.

[dan_s]

Iran threatens to attack Israel if the US launches an assault on it with the aircraft carrier now in the region

Iran has aimed fire at the deployment of US military forces in the Persian Gulf and threatened an attack on Israel if the aircraft carrier was ever used against them.

Speaking to reporters on Sunday the Iranian Parliament's vice-speaker Ali Motahhari said the military forces based in the region had started a 'psychological' war in the region and warned the US against an attack on the Middle Eastern nation.

The comments come after the Pentagon deployed the USS Abraham Lincoln, the fifth Nimitz-class aircraft carrier in the United States Navy, to the Middle East (offshore Syria) in a move that officials said was to counter 'clear indications' of threats from Iran.

In addition to the deployment of the aircraft carrier, the country has also sent over B-52 bombers to the area.

The aircraft, which has at least 40 to 50 warplanes on it and was commissioned in 1989, will be replacing another carrier that was removed from the region in April.

Read More: http://www.msn.com/en-us/news/world/ira ... ABiloO_1|4


MY TAKE: If it is proven that Iran was behind the attacks on Sunday on the oil tankers, "Stuff is going to hit the fan".