It is obvious that the simmering tensions in the Strait of Hormuz are starting to boil over. Yesterday a report that a US ship fired on a boat just outside of the Strait, sent Brent and WTI up to a new high for the session. This comes as the market already had a bullish bias in anticipation of what Fed Chairman Ben Bernanke might say about another shot of stimuli against a backdrop of a slowing global economy. The International Monetary Fund lowered growth forecasts and more European banks have been downgraded. Yesterday it was about the Strait and today it is all about Ben Bernanke.
AP and Bloomberg News reported that a U.S. Navy ship open fired on a fishing boat off the coast of Dubai yesterday, killing one person aboard the vessel after it ignored warnings not to approach, U.S. officials said. “An embarked security team aboard a U.S. Navy vessel fired upon a small motor vessel after it disregarded warnings and rapidly approached the U.S. ship,” Lt. Greg Raelson, a media officer for the U.S. Navy, said in an e-mail. The incident occurred at 2:50 p.m. local time yesterday, 10 miles off the port of Jebel Ali in the United Arab Emirates, he said.”
Bloomberg Reported that the shooting happened near the Strait of Hormuz, where tensions have risen this year as Iranian officials threatened to shut down the waterway in response to increased U.S. and European pressure. Western sanctions on oil and other products aim to prevent Iran from acquiring nuclear weapons technology, a technology that Iran maintains it isn’t seeking.
The USNS Rappahannock issued warnings to the smaller vessel by voice, radio and light signals before firing, a U.S. official said. The vessel, a 41,000-ton fleet replenishment oiler operated by the U.S. Navy’s Sealift Command and staffed mostly by civilians, also carried a security team, the Navy said. When the warnings failed, the security team, “fired rounds from a .50-caliber machine gun,” Raelson said. The boat that was hit had approached to within 100 yards (91 meters) to 200 yards of the U.S. ship, according to another U.S. official, also speaking on condition of anonymity. An investigation of the incident showed the boat didn’t receive a warning and was sailing on its rightful course, Abu Dhabi-based newspaper, The National, reported today, citing Dahi Khalfan, Dubai’s police chief. The shooting was a mistake; the newspaper cited him as saying.”
Still even if it was a mistake, one has to wonder why the fishing vessel failed to heed the warnings. There has to be more to this story.
There are also reports of explosions in the city of Jos in Nigeria. We will see if these early reports impact oil trading.
With weak retail sales data in the US the market is convinced that this time Ol' Ben will not let the market down and the market expects to hear the sweet words of stimulus, which is like music to the commodity bulls ears. Of course a lot of time when the market is expecting to hear one song, Ben has a tendency to play another!