2019-10-22 09:41:271970-01-01 00:00:00

Oil Price Surges

The price of oil has surged overnight after two oil tankers were attacked in the Oman gulf. The attack occurred close to the East entrance of the Strait of Hormuz, one of the world’s most important oil arteries.

The Japanese-owned, Kokuka Courageous and Norway’s Front Altair were bombed by sophisticated military-grade weapons around dawn local time, forcing both crews to abandon ship.

The United States Secretary of State Mike Pompeo blamed Iran of being behind the attacks in a press conference shortly after the incident. He announced that United States intelligence described that the expertise required, weapons used, other recent attacks by Iran, and that no other proxy groups within the region having the resources or sophistication to conduct the attack, confirmed Iran was responsible. He also stated that Iran is clearly a threat to international peace and security.

The Lowy Institute has also announced this morning on the ABC, in agreeance that the evidence indicates that a state actor was involved, most likely to be Iran. He also stated however, that the United States needs to be able to provide more evidence to substantiate its claims as the facts emerge in the coming weeks. The UN Secretary General also weighed in saying facts must be established and those found to be responsible will face consequences.

The President of Iran Hassan Rouhani denied responsibility for the attack. He announced that America should not be trusted and that he had given up trying to negotiate with the Trump administration. He denied any involvement behind the attacks and said that his Navy rescued the crew members involved.

Over a third of the world’s oil passes through the Strait of Hormuz. Stability within the strait is highly important for the global oil price as everyday 15 million barrels of crude worth hundreds of millions of dollars is transported through. The strait is only two miles wide and has only one shipping lane in each direction.

Iran has threatened that if the United States continues to hurt its oil exports by not lifting export sanctions, it will close the strait,  cutting off access to the Persian Gulf. This would not be unprecedented. In the eighties, Iran seized the strait in what was known as the Iran-Iraq ‘tanker wars’. The two oil rich nations attempted to shut down each other’s oil exports by attacking each others tankers. Over two-hundred were bombed.

The Middle East is one of the three oil hotspots of the world. The other two are in the North Sea and the United states. Any instability within these regions will significantly shift the price globally. Any news that indicates a reduction in supply such as last night’s attack in the Gulf of Oman, is reflected in oil markets moving significantly higher.

This was the case overnight. The global benchmark, Brent oil futures on London’s ICE Futures exchange  immediately rose by 2.2% and was up over 4.5% during trade before trimming back and closing up by 3.78% at $US62.04 per barrel.

In the United States overnight on  the New York Mercantile Exchange, West Texas Intermediate futures (WTI) also reacted to the news optimistically up by 2.2%. It then moved throughout trade peaking above 4.5% before officially closing 2.2% higher at $US52.28 per barrel. Petroleum-dependent stocks on Wall Street also moved significantly in response to the oil price surge.

The lift of the oil price comes on the back of an oil market that has been trending downwards for quite some time. WTI closed yesterday down by over 20% since its peak last month. This was due to growing crude oil inventories in the United States indicating weaker demand globally. However, last night’s incident quickly prompted an about turn for the oil market.

Companies within the energy and materials sectors tend to do better after the price of oil rises while those dependent on oil tend to suffer. This has been the case for Australia this morning with the energy and materials sectors within the ASX both trading up by 1.88% and 1.51% respectively.

Traders took advantage of the sentiment this morning. Beach Energy (BPT), an oil and gas exploration and production company was up by over 5% in early trade before simmering off and returning to where it started. Santos (STO) also started the morning off sharply higher than where it closed yesterday and managed to sustain the growth well into the afternoon trading up 2.8%. Qantas (QAN), a company which could be hurt by a rising oil price managed to trade today practically unscathed, trading flat.

As the instability within the Middle-Eastern gulfs, and the relations between the United States and Iran become increasingly exacerbated. The price of oil is expected to remain turbulent.

By Isaac Batterham

Click here for a 7 days access to our Lotus Blue Portal.

KOSEC Terms & Conditions

Kodari Securities Pty Ltd (CAR 399556) trading as KOSEC is regulated by the Australian Securities and Investment Commission (ASIC). KOSEC is a financial services company and any information provided by its platforms, portals, reports and documents is protected by copyright. Any unauthorised production of this information is prohibited.
KOSEC reserves the right to change or remove any information provided on our website, reports or any documents including these terms and conditions at any time without notice. The change or modification to the terms and conditions will be effective immediately upon posting an updated version on our website, necessary platforms and documents. It is recommended that you review the information provided on our website, including these terms and conditions frequently for any changes.

Disclaimer
KOSEC provides general advice only. The information provided is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. KOSEC recommends that you obtain your own independent professional advice before making any decision in relation to your particular requirements or circumstances. Please make sure you read our Financial Services Guide (FSG).

KOSEC does not guarantee any returns. Past performance of any product discussed is not indicative of future performance. (We urge that caution should be exercised in assessing past performance. All financial products are subject to market forces and unpredictable events that may adversely affect their future performance). Investing in the stock market can incur huge losses. Please also be aware that fees will incur on every transaction regardless of the performance of your investments or returns generated. Employees and or associates of KOSEC may hold one or more of the stocks, securities or investments reviewed by the company.

Your use of information from our website, reports, documents and from talking to our representatives/associates is at your risk. Under no circumstance should the investment be based solely on KOSEC information and general advice. You should seek professional financial planning advice.
KOSEC aims to maintain the accuracy of the data and information provided on this website, by using information prepared from a wide variety of sources, which KOSEC to the best of its knowledge and belief, considers accurate and does not make any representations or warranties of any kind, expressed or implied, about the completeness, accuracy, reliability, suitability or availability of the information provided.

We may at times refer to third parties, which the details of these third parties have been provided solely for you to obtain further information about other relevant products and entities in the market. KOSEC has no control over the information third parties have, or the products or services offered, and therefore make no representations regarding the accuracy or suitability of such information, products or services. You are advised to make your own enquiries in relation to third parties. Our inclusion of any third party content is not an endorsement of that content or the third party.

Fees
As a client you will be charged a yearly service fee and a set brokerage fee per transaction. Your service fee will automatically renew at the end of your agreed 12 month period at the same rate advertised at the time. Your credit card or bank account will be charged for a further year following which will again auto renew until you cancel your yearly service fee. You can cancel the auto renewal at any time in advance of the renewal date by contacting us. KOSEC is aware of the need to ensure the security of your credit card details and our payment systems are compliant with the Payment Card Industry (PCI) Data Security Standard.

Privacy
You consent to receiving email correspondence from KOSEC, as well as companies KOSEC has an association with. These emails will be sent by KOSEC and third party companies. You can opt out of receiving any category of emails at any time by contacting us. We may from time to time inform you of special offers, or even ask your opinion of the services we provide, but your involvement is optional. Should you request us to do so, we will archive your details.

Indemnity and Liability
You indemnify KOSEC from all claims or threatened claims, suits, demands, damages, costs as well as including legal costs incurred in dealing with any threatened claim, expenses made by any person or corporation against KOSEC and any other amounts which is caused by KOSEC providing information, execution and General Advice.

You hold KOSEC harmless and release it from any liability in respect of any loss, harm or damage arising from a decision made by you on the basis of information obtained through the use of our portal, reports, documents or any General Advice given and any transaction taken place.

You hold KOSEC harmless and release it from any liability in respect of any loss, harm or damage arising from delays in executing orders for the client and acknowledges KOSEC makes no guarantees about the time taken to execute an order on behalf of the client. You acknowledge that KOSEC relies on third parties in providing technology and release KOSEC from any harm, loss or damage you may suffer as a result of the failure of such information technology.

Cookies and Links
KOSEC website, and its portal uses cookies, which lets us identify your browser while you are using the site or our portal. Cookies do not identify you personally. They simply allow us to track your usage patterns. If you prefer not to receive cookies, you can configure your browser to reject them or to notify you when they are being used. The functionality of the KOSEC website may be impacted if you restrict the use of cookies.

Fill up the form below and we will get back to you as soon as possible.

CLAIM YOUR FREE E-BOOK &
7 DAY ACCESS TO LOTUS BLUE

STOCK MARKET SUCCESS

KOSEC’s CEO, Michael Kodari’s new book, “Stock Market Success” valued at $39.95, available at Dymocks book stores with all the proceeds going to Dymocks Children’s Charities.

CLAIM YOUR FREE E-BOOK WHEN YOU LOGIN TO LOTUS BLUE INVESTMENT PORTAL

Latest TV Commercial