Global oil prices rallied for the first day this week on Wednesday after President Donald Trump issued a stark warning to Iran that could escalate military tensions in the Gulf region.
Trump said he has instructed the U.S. Navy to "shoot down' any Iranian ships that 'harass' American vessels in the Gulf, or elsewhere. The Tweet appears to be a reference to previous alleged attacks by Iranian ships in the region on Saudi Arabian tankers hauling crude to customers in Asia and around the world.
Brent crude futures contracts for June delivery, the benchmark reference for around 60% of global crude purchases, jumped $1.56 per barrel from last night's close following the President's Tweet, to change hands at $20.89 each heading into the end of the session, after trading as low as $15.98 per barrel -- a 1999 trough -- in early European dealing.
WTI crude futures for June delivery, meanwhile, rose $2.92 to $14.49 per barrel as investors who sold out of yesterday's expiring May contract jumped into the new U.S. benchmark.
Last fall, oil prices spiked to multi-year highs after a series of drone attacks, which U.S. officials pinned on Iran, that targeted the Abqaiq processing facility and the Khurais oil field, two key pieces of Saudi infrastructure that comprise around 5.7 million barrels of the Kingdom's daily output.
Iran, which also has been implicated in drone attacks on various oil tankers in the Strait of Hormuz, denied involvement.
Trump expressed his doubts on Twitter at the time, referring to an incident in June when an Iranian surface-to-air missile that shot down a U.S. military surveillance drone, and calling Iran's earlier denial "a very big lie."
Trump's Wednesday Tweet, however, followed several attempts to support oil markets -- and the U.S. energy industry -- amid a collpase in global crude prices to multi-decade lows.
"We will never let the great U.S. Oil & Gas Industry down. I have instructed the Secretary of Energy and Secretary of the Treasury to formulate a plan which will make funds available so that these very important companies and jobs will be secured long into the future!,", the President Tweeted Tuesday.
Last Friday, oil services group Baker Hughes said U.S. drillers pulled 66 rigs from operation, the biggest decline since February 2015 and capping a one-month period during which some 35% of capacity has been taken offline amid signals of a cliff-edge decline in global demand.
The International Energy Agency, in fact, has forecast the steepest decline in global demand on record as the coronavirus pandemic shutters the world economy.
That followed last week's agreement among OPEC member states, as well as non-member allies such as Russia, to cut their collective production by 9.7 million barrels per day, with the U.S., Canada and Brazil contributing 3.7 million barrels per day.