Current Oil Prices Increase with Stronger Euro and US Navy Incident

The current oil prices posted an increase that was further strengthened by a stronger euro and reports of the US Navy’s firing on a small boat in Dubai’s Gulf.

Current oil prices maintained their increases even after an official from the UAE said that the vessel had Indian fishermen on board. One of the fishermen died and three others were wounded.

WTI, the main contract of New York, rose by $1.33 for a per barrel oil price of $88.43 in the latter parts of Friday. Brent North Sea for August delivery ended higher by $1.15 for a per barrel oil price of $103.55.

According to Summit Energy’s Matt Smith, the rise of the euro versus the dollar supported the increase in crude prices. Towards the end of the past week, the euro gained about 0.24%.

The incident in the Gulf happened amid on-going tensions between Iran and the West over the former’s alleged nuclear program and its threats to close the Hormuz Strait as an important channel of oil worldwide.

According to defense officials in the United States, the motorboat did not observe warnings to avoid getting close to the USNS Rappahannock refueling ship that is close to Jebel Ali port of the UAE. As a result, sailors in the American vessel were concerned that the boat could pose a danger.

Officials of the United States said that its crew tried to repeatedly caution the operators of the vessel to move far from their approach.

Meanwhile,n Saudi Arabia and the UAE opened crude pipelines earlier that bypass the Hormuz Strait. Both pipelines provide alternative routes for transporting crude, easing worries of Iran’s threat to disrupt crude supplies, said IG Markets.

The commodity analysts of JPMorgan commented that, while the ability to bypass the Hormuz Strait improves the exports of both Saudi Arabia and UAE, the protection it gives against the geopolitical risk premium is unclear.

Should the shipping routes in the Middle East Gulf becomes truly threatened, oil prices will rapidly adjust to show the anticipated length of disruption and the possibility for justifying the release of global strategic reserves.

By: Chris Termeer