President Donald Trump has increased his warnings to Iran. He stated that if Iran attacked US vessels to protect commercial shipping, then there would be high price to pay. President Trump also announced that South Korean cargo ship was being fired on in the Strait of Hormuz. He suggested that South Korea may become involved with operations.
The underlying interest is now shifting out of crude prices. According to Goldman Sachs, global inventories are not yet at very low levels. But the rate of drawdowns is now becoming uncomfortable. The bank also reported that buffers on refined products are rapidly dwindling, particularly in naphtha, LPG and jet fuel. This means that the world would suffer a shortage of fuel in the case of a closure of the Strait of Hormuz.
This is significant since the market might not just be exposed to increased prices. It can also experience physical deficits in the regions that are heavily dependent on imported fuel. Goldman Sachs also cited the existence of a greater risk of product scarcity in South Africa, India, Thailand and Taiwan. This continues to hold oil prices at bay even following a short term decline.
WTI Oil Technical Analysis – $120 Breakout Could Trigger Strong Rally
From a technical perspective, WTI crude oil has been consolidating between $80 and $120 since the U.S.-Iran war started. However, the formation of rounding bottoms each time the price drops indicates price strength.
