Donald Trump not only rattled stockmarkets last week, but gave commodities a right shaking – led by oil.
In fact some analysts now warn that geopolitical risk is a bigger threat to prices than the continuing surge in US production, which topped 10.4 million barrels a day last week.
The appointment of John Bolton, a conservative foreign policy hardliner, as President Donald Trump’s new national security adviser has lifted the possibility of renewed sanctions against Iran and rising tensions in the Middle East.
So up went prices on Friday and by the close they had had their best week for eight months. (and up will go Australian petrol prices as well with the dollar around 77 US cents at the close on Saturday morning, a three month low)
Brent, the international benchmark jumped 2.2% to settle at $70.45 a barrel in Europe and less than a dollar away from the three-year highs of $US71.28 set in late January.
Brent was up 6.4% for the week which was its best week since July 28.
In the US West Texas Intermediate also notched its best week since late July with a rise of 2.5% on $US65.88 a barrel on Friday, to be up 5.7% over the five days.
The Financial Times reported:“Oil markets want a bolt-on price premium for Bolton,” said Olivier Jakob, strategist at Petromatrix. “It is difficult to find [someone] more hawkish than Bolton and almost impossible to find any article that does not associate his name with either ‘war’ or ‘bomb’, and usually those words are also associated with ‘Iran’.
“Combined with the nomination of Mike Pompeo, another hawk, at the State Department, most of the market will conclude that at the minimum the Iranian nuclear deal is dead . . . Oil will be bought by financial institutions as a hedge against war with Iran,” according to the FT.
On top of the Bolton appointment was continuing concern about supplies from Venezuela which came under further pressure last week as the US prohibited all American trade in the petro, a digital currency launched by the Latin American country earlier this year to try to skirt sanctions.
Oil also received a boost earlier in the week after US stockpiles posted a surprise decline. The 2.6 million barrel fall in stocks – to 428 million came as output rose past the 10.4 million barrels a day mark for the first time to be 14% higher than a year ago.
Oil services group, Baker Hughes said on Friday the number of active rigs drilling for oil in the US rose by four to 804 this week. The oil-rig count had also climbed by four last week.
The total active US rig count, which includes oil and natural-gas rigs, also climbed by five to 995, according to Baker.
That’s the highest number of rigs in use for several years and a pointer to further rises in US output in coming months.
