Oil Prices Climb After Russian Plane Shot Down
September 18 2018 - 5:37PM
Dow Jones News
By Stephanie Yang and Christopher Alessi
Oil prices rose Tuesday, boosted by heightened geopolitical
tension after Russia blamed Israel for the loss of one of its
reconnaissance planes shot down overnight by Syrian defense
systems.
Light, sweet crude for October delivery rose 1.4% to $69.85 a
barrel on the New York Mercantile Exchange. Brent, the global
benchmark, increased 1.3% to $79.03.
The loss of Russia's reconnaissance plane, shot down by Syrian
defense systems, threatens to increase geopolitical instability,
contributing to uncertainty in the global oil market. The Russian
Defense Ministry told Israel that it "reserved the right to take
steps to respond" to the downed plane.
"Simply the presence of [Russia, Syria and Israel] in the same
headline certainly isn't going to dampen bullish sentiment today,"
said analysts at TAC Energy.
Analysts said oil prices have become more sensitive to shifts in
geopolitical tensions, as global supply has been called into
question. Traders are grappling with the impact of Iranian
sanctions to the country's exports, while also debating how much
the global oil cartel will make up the difference.
President Trump in May pulled the U.S. out of a 2015
international agreement to curb Iran's nuclear program, setting the
stage for the reimposition of economic sanctions on the Islamic
Republic. Analysts have estimated that more than one million
barrels a day of Iran's roughly 2.5 million barrels a day in
exports could be at risk.
However, increasing production from the Organization of the
Petroleum Exporting Countries and its partner producers, including
Russia, have helped keep a cap on prices.
"OPEC members with spare capacity try to live up to expectations
to make up for the production shortfall in member countries, such
as Venezuela and Iran," according to Tamas Varga, an analyst at
brokerage PVM Oil Associates Ltd., who said the group's output has
increased nearly 700,000 barrels per day in the past five
months.
Prices fluctuated between gains and losses earlier in the
session as trade tensions between the U.S. and China also gave
investors pause.
President Trump Monday announced plans to impose new tariffs on
around $200 billion in Chinese goods, leading China to vow fresh
retaliatory measures. On Tuesday, China retaliated by announcing
new tariffs on $60 billion of U.S. goods. Such actions have raised
concerns over the strength of global fuel demand, which has been a
major factor underpinning the strong crude rally in the past
year.
"The oil market has thus far been able to take the evolving
tariff issues in stride with the help of a steady U.S. stock market
that has virtually ignored potential negative impacts off of the
mounting tariffs that the Trump administration is applying on
China," said Jim Ritterbusch, president of Ritterbusch &
Associates, in a Tuesday note.
Analysts are also anticipating that government data due
Wednesday will show a decline in the amount of crude oil in
storage. Traders and analysts surveyed by The Wall Street Journal
forecast on average that crude stockpiles fell by 2.1 million
barrels in the week ended Sept. 14. The U.S. Energy Information
report is scheduled for release at 10:30 a.m. ET Wednesday.
The American Petroleum Institute, an industry group, said late
Tuesday that its own data for the week showed a 1.2 million-barrel
increase in crude supplies, a 1.5 million-barrel fall in gasoline
stocks and a 1.5 million-barrel increase in distillate inventories,
according to a market participant.
Gasoline futures rose 1.4% to $2.0049 a gallon, and diesel
futures gained 1.3% to $2.2357 a gallon.
Write to Stephanie Yang at stephanie.yang@wsj.com and
Christopher Alessi at christopher.alessi@wsj.com
(END) Dow Jones Newswires
September 18, 2018 17:22 ET (21:22 GMT)
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