Oil prices surged more than twopercent on Friday after an Iranian tanker was hit by suspected missilestrikes in Saudi Arabia, sparking fresh supply concerns in the already-tenseGulf region, reports BSS/AFP.
The National Iranian Tanker Company, which owns the ship, said the hull ofthe Sabiti suffered two separate explosions off the Saudi coast, adding theywere “probably caused by missile strikes”. The news sent Brent surging 2.3 percent to $60.46 at one point, while WestTexas Intermediate jumped 2.1 percent to $54.69.
Both later eased back slightly but investors remain on edge as theexplosions come just weeks after two of Saudi Arabia’s biggest oilinstallations were hit in blasts that briefly wiped out five percent of global production, causing a record rise in prices. They will also revive concerns about the security of the world’s crudesupplies as tensions in the tinderbox Gulf are already high, with Riyadh andthe United States accusing Iran of being behind last month’s attacks.
“The explosion points to potential geopolitical risks and that has onceagain surprised the market to the upside,” Will Sungchil Yun, a commoditiesanalyst at HI Investment & Futures Corp., told Bloomberg News. “It still remains to be seen whether prices will keep rising as investorsare putting their focus on (China-US) trade talks and the gains won’t lastlong if the negotiations result in a no-deal.”
Crude had already been rising on signs of progress in the China-US tradetalks and after OPEC Secretary-General Mohammad Barkindosaid the grouping ofthe world’s giant producers would do what it could to avert another slump. Asian equities were also enjoying strong buying thanks to hopes ofprogress in the China-US trade talks, with Donald Trump saying they were“going very well”.
Negotiators from the world’s top two economies kicked off much-anticipatedtalks on resolving their long-running tariffs row on a positive footing,easing worries that they might be cut short. Without elaborating, Trump told reporters: “I will say I think it’s goingreally well. We had a very, very good negotiation with China.” Adding to the positive vibes was news that Trump would meet China’s toptrade envoy Liu He at the White House.
The developments allowed dealers to breathe a sigh of relief as tensionsbetween the two sides appeared to be growing after the US put newrestrictions on Chinese firms over human rights abuses and reports Beijinghad narrowed the issues it was willing to discuss. “The fog of trade war is beginning to lift, giving way to an air of tradeoptimism sweeping through global capital markets,” said Stephen Innes, Asia-Pacific market strategist at AxiTrader. “Investors are starting to believe there is light at the end of the…tunnel as hope springs eternal.”
– Brexit optimism –
Asian markets were up across the board, with energy firms given a bigboost by the pick-up in oil prices. Hong Kong led gains, jumping more than two percent, while Tokyo added morethan one percent, and Shanghai and Sydney each put on 0.9 percent. Singapore and Seoul both gained 0.8 percent, with healthy gains alsorecorded in Wellington, Manila, Mumbai and Jakarta. In early trade London fell 0.3 percent but Paris rose 0.3 percent andFrankfurt put on 0.9 percent.
Talks are expected to resume on Friday with hopes they can at least leadto a delay in tariffs, due next week, being imposed on China. “The prospect of US-China trade truce that results in the suspension offurther planned tariffs increases is rightly welcome news,” Rodrigo Catril atNational Australia Bank said.
“But as it is often the case, the devil will be in the detail,” he warned,adding that if the optimism is to last “a meaningful de-escalation intensions is required”. Markets are also getting some support from rare signs of progress in theBrexit saga after British Prime Minister Boris Johnson and his Irishcounterpart Leo Varadkar said they could see a route towards striking apossible divorce deal.
After hours of talks regarding the vexed question of Northern Ireland, thetwo issued a joint statement that said: “Both continue to believe a deal isin everybody’s interest. They agreed that they could see a pathway to apossible deal.” While Varadkar said there were still hurdles to overcome, the news didprovide some much-needed hope in the crisis after German Chancellor AngelaMerkel was reported to have said Brexit talks were “close to breaking down”.
The pound surged two percent against the dollar on Thursday and alsorallied on the euro, and in early Asian trade managed to hold its ground. “The process has dragged on, and there have been a few bumps along theway, but yesterday’s message was one of the more upbeat updates,” said DavidMadden, market analyst at CMC Markets UK.
