Forexpros – Crude oil futures rocketed higher during U.S.trade Tuesday, as escalating Iranian tensions combined with global monetary easing hopes to create a bullish move in the commodity.
On the New York Mercantile Exchange, light sweet crude futures for delivery in August traded at USD87.52 a barrel during U.S. afternoon trade, surging 4.56%.
Oil prices jumped to the highest levels of the session after media outlets in Tehran reported that Iran had successfully tested medium-range missiles capable of hitting Israel in response to threats of military action against the country.
Oil traders have renewed their focus on lingering tensions between Iran and Israel in recent sessions. There are fears that an escalation of hostilities between Israel and Iran could set off a conflict across the region and send oil prices skyrocketing.
Meanwhile, Iran’s National Security and Foreign Policy Committee drafted a bill Monday proposing to block the Strait of Hormuz for oil tankers in response to a European Union oil embargo on imports from Iran, which started on July 1.
The Strait of Hormuz, located between Iran and Oman, is one of the most important oil-shipping channels in the world, handling about 33% of all ocean-borne traded oil, according to the U.S. Energy Information Administration.
U.S. oil prices hit a high of USD110.53 on March 1, at a time when tensions over Iran’s nuclear program were running high.
Prices found additional support amid growing expectations that central banks in Europe and the U.S. will implement measures to bolster economic growth.
The U.S. Institute for Supply Management said Monday that its index of purchasing managers fell by 3.8 point to 49.7 in June from a reading of 53.5 in May, the first contraction since July 2009.
The data fuelled speculation that the Federal Reserve may implement a third round of quantitative easing, to shore up growth in the U.S. economy, which has been hit by the ongoing crisis in the euro zone.
Investors were also eyeing the outcome of the European Central Bank’s policy meeting on Thursday, amid growing expectations for a rate cut to help bolster growth in the bloc.
Data on Monday showed that the unemployment rate in the region rose to a record in May, while the manufacturing sector remained firmly in contraction territory in June.
Oil traders were also looking ahead to fresh weekly information on U.S. stockpiles of crude and refined products to gauge the strength of oil demand in the world’s largest oil consumer.
The American Petroleum Institute will release its inventories report later in the day, while Thursday’s government report could show crude stockpiles fell by 2.2 million barrels.
The U.S. is the world’s biggest oil-consuming country, responsible for almost 22% of global oil demand.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for August delivery climbed 3.15% to trade at 100.41 a barrel, with the spread between the Brent and crude contracts standing at USD13.90.
Brent prices have been well-supported in recent sessions amid concerns over a disruption to supplies from Norway, the world’s eighth largest oil exporter.
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