Oil prices soar 21.5% due to tension in the Middle East and future cuts

The price of Texas intermediate oil (WTI) opened Thursday up 21.55%, to $16.75 a barrel, after closing Wednesday's session with another 19.1% rise, as tensions in the Middle East spurred prices and the limit on storage suggests a cut in production that could bring some stability to the markets. At 9.15am New York local time (13.15 GMT), WTI futures contracts for June delivery totalled $2.97 from Wednesday's previous session. 

Black gold prices were up again and investors continue to look at the foreign policy of US President Donald Trump's administration, which yesterday ordered his navy to destroy Iranian ships if it felt threatened in the Persian Gulf, which analysts have interpreted as a geopolitical move in a key oil supply area. "I have ordered the U.S. Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea," tweeted Donald Trump.

In general, according to experts, tensions in this area tend to lead to slowdowns in Persian Gulf production, something that is highly desirable in this context where global storage capacity is at its limit in a market "flooded" by excess supply and low demand due to economic standstills and current confinement measures in much of the world. 

The low prices of American oil and the lack of space to store it invite investors to believe that soon there will be more closures in American wells, which would imply that the United States could reduce its flow of oil and intensify reductions in world production, which has already undergone an adjustment following the agreement of the Organization of Petroleum Exporting Countries (OPEC) and its allies, who agreed to lower their pumping by 9.7 million barrels per day (bpd).

In this sense, another upward factor in the opening was that the regulators in Oklahoma, where the largest oil delivery point in the United States is located, announced aid to producers who decide to close their wells. 

Demand for crude from U.S. refineries is more than 4 million bpd lower than the same period last year, a situation that is worsening as storage capacity is running out, although producers are making room at a "never-before-seen" pace, according to analysts. 

It is estimated that the confinement measures have reduced demand by about 21 million bpd in the second quarter of 2020, according to Rystad Energy.