U.S. oil surges on Thursday after Iran shot down a U.S. military drone, prompting President Donald Trump to blast Tehran on Twitter and fueling concerns of a conflict between the two countries.
U.S. West Texas Intermediate crude U.S. oil surges up to $2.89, or 5.4%, to $56.65 a barrel after surging as much as 6% around 10 a.m. ET. Brent crude, the global benchmark, was up $2.79 — a 4.5% increase — at $64.61 a barrel.
The strained relationship has sent crude prices soaring since more than 20% of the world’s oil output comes from the Middle East. Any threats to the free flow of oil through key chokepoint the Strait of Hormuz could dampen crude supplies.
“If we didn’t have the U.S. resource endowment, oil would absolutely be over $100. Pre-Permania, oil would be above $100” says RBC head of global commodities strategy, Helima Croft.
“We have a drone shot down, we have President Trump now tweeting Iran made a big mistake. I think the market may be waking up to the degree of risk entailed by these incidents,” Croft said.
Also boosting oil on Thursday was a larger-than-expected decline in U.S. crude inventories and the potential for prolonged supply restraints by the Organization of the Petroleum Exporting Countries.
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