Oil prices rose for the third consecutive day on Thursday after Saudi Arabia suspended oil shipments through a strait in the Red Sea following an attack on two oil tankers and as trade tensions between the United States and the European Union eased.
Brent futures rose 61 cents to settle at $74.54 a barrel, a 0.8 percent gain. The contract earlier touched $74.83 a barrel, highest since July 16. U.S. West Texas Intermediate (WTI) crude futures were up 31 cents, settling at $69.61, a 0.5 percent gain.
After meeting European Commission President Jean-Claude Juncker at the White House on Wednesday, U.S. President Donald Trump agreed to refrain from imposing car tariffs while the European Union and the United States start talks on cutting other trade barriers.
“Certainly it’s positive for the economy and commodities,” said John Kilduff, partner at Again Capital Management in New York. “This sort of revives economic prospects that were dimmed from the trade wars that were started.”
Brent rose in post-close trading on Wednesday after Saudi Arabia said it was “temporarily halting” oil shipments through the Red Sea shipping lane of Bab al-Mandeb after an attack by Yemen’s Iran-aligned Houthi movement.
Any move to block the Bab al-Mandeb, which is between the coasts of Yemen and Africa at the southern end of the Red Sea, would virtually halt oil shipments through Egypt’s Suez Canal or the SUMED crude pipeline that link the Red Sea and Mediterranean.
An estimated 4.8 million barrels per day of crude oil and refined products flowed through the Bab al-Mandeb strait in 2016 towards Europe, the United States and Asia, according to the U.S. Energy Information Administration.
Saudi Arabia additionally has the Petroline, also known as the East-West Pipeline, which mainly transports crude from fields clustered in the east to Yanbu for export. That could offset a bottleneck caused by Bab al-Mandeb’s closure.
Olivier Jakob from Petromatrix said in a note it remains to be seen whether the Saudi move has an impact on shipping costs.
“The passage is not as crucial as the Strait of Hormuz… but restricted flows through it would have an impact not just for crude but also for products due to the longer voyage time,” he said.
U.S. crude oil inventories last week tumbled more than expected to their lowest level since 2015, the EIA said on Wednesday, as U.S. gasoline and distillate stockpiles fell.
Traders said Thursday that inventories at the U.S. storage hub in Cushing, Oklahoma, have continued to fall. They were forecast to have dropped by 1.1 million barrels through Tuesday, traders said, citing energy information provider Genscape.