Brent crude oil futures jump on reports of tanker on fire in Sea of Oman
According to Bloomberg, which cited a person with knowledge of the matter and a United Arab Emirates official, the Front Altair tanker was left ablaze after loading oil in Abu Dhabi and had sent a distress signal.
The cause of the blaze was unknown, although some reports cited the possibility that a magnetic mine might be to blame, and it was suspected that a second tanker, the Kokuka Courageous, was hit by a torpedo.
TradeWinds reported that holes had been blown above the waterline in the hulls of both ships, with the master of the Hyundai Dubai, who picked up the sailors from the Front Altair, having reportedly seen three explosions and attributed the resulting fire to a "surface attack".
But in reaction to the news, as of 0751 BST front month Brent crude oil futures were climbing by 3.321% to $62.0 per barrel on the ICE.
The crews of both vessels were safely evacuated.
On Twitter, Iranian foreign minister Mohammad Javad Zarif described the latest events as "suspicious" while Moscow reportedly warned against blaming Tehran for the "incidents".
The two incidents occurred as Japanese Prime Minister, Shinzo Abe, was visiting Iran in a diplomatic push to try and act as an intermediary between the White House and Tehran and was said to have carried a message from the US President by Iranian Supreme Leader Khamenei.
Neil Wilson, chief market analyst at Markets.com conceded that geopolitical tensions had worsened recently with the short-term concerns around supply shortages that go with that, although on longer time frames he spied little indication that the bear market in oil would end anytime soon.
But given that OPEC had already curbed output and burgeoning supplies from the US, Wilson said that "the market is far less susceptible to a shock".
To back up his arguments, he pointed out the weekly build of 2.2m barrels in US inventories reported by the Department of Energy just the day before.
With the US moving into the summer driving season, "we’d normally see stocks decline but they keep moving higher."
"More supply, not enough demand. This is squeezing longs and we should see further liquidation in speculators’ net long positions, twisting the screw more."
"Massive US supply has changed the rules of the game and there’s not a lot OPEC can do about it. Brent recovered to the $60.50 area having dropped below $60, before it spiked on the Oman news to trade through $62. Risks skewed to downside - it looks like $50 will be seen before $70.
"However, we’re in a major support zone and the latest dip could be the second trough in a double-bottom reversal."
Analysts at SP Angel chipped in, saying: "The incident marks an escalation of tension in the region and is the latest in a series of incidents which have damaged four oil tankers in the Straits of Hormuz and another ten en-route to Venezuela."