Oil Rebounds on Reports of Planned Iran Strike on U.S. in Gulf

By Barani Krishnan

Investing.com - The specter of more tariffs on China and larger U.S. crude builds are worrying to oil traders, but nowhere as worrying as the possibility of an Iranian strike on U.S. interests.

Oil prices went from 2% down to settling up on Monday after Axios quoted Israel's Channel 13 diplomatic correspondent Barak Ravid as saying that Israel has passed information to the U.S. about an alleged Iranian plot to attack U.S. interests in the Persian Gulf.

"This was before (U.S.) national security adviser John Bolton threatened Iran with 'unrelenting force' last night, senior Israeli officials told me," Ravid said in the report carried by Axios.com .

Oil had a volatile day, falling more than $1 per barrel in Asia and Europe on U.S. President Donald Trump's threat to hit China with new tariffs, before recovering strongly on the reports of rising Gulf tensions.

West Texas Intermediate futures, the benchmark for U.S. crude, settled up 31 cents, or 0.5%, at $62.25 per barrel. WTI had fallen more than 2% in Asian and European trading, sinking to $60.06, the lowest since April, while clinging to the key $60 support.

London Brent futures, the global benchmark for oil, settled up 39 cents, or 0.55%, at $71.24.

Like WTI, Brent also slumped more than 2% earlier, touching a 1-month low of $68.69 before heading higher in the afternoon.

Oil prices initially slumped on Trump's tweet on Sunday that he will hike tariffs on $200 billion worth of Chinese goods before the end of this week and target hundreds of billions more “soon” after reportedly being annoyed by China’s attempts to drag out a trade deal between the two countries and “renegotiate” what had been agreed over the past five months.

Since the two sides agreed to a tariff ceasefire in November, several rounds of talks have been held, with both governments talking up the possibility of a deal this spring.

While WTI and Brent briefly fell through their 200-Day moving averages on Monday, the U.S. benchmark remains up 37% on the year and its U.K. peer shows a year-to-date gain of 32%.

After blockbuster gains of around 30% or more in the first quarter, the gains in oil prices have slowed, advancing just about 6% in April. Since the start of May, prices have slipped as the Energy Information Administration surprised traders by reporting one large U.S. crude build after another over the past six weeks.

Last week's inventory growth, particularly, stunned the market, coming in at just under 10 million barrels. With that, a generous 30 million barrels have been added to U.S. crude stockpiles since early March.

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