Saudi shake-up snaps crude prices higher
Crude oil prices went on a wild ride after reports that the Iranians seized a cargo ship, and after a major Saudi shake-up that came after the close. If that wasn't enough for oil traders today, we get a double dose of excitement as the Energy Information Administration releases its supply report and the Federal Open Market Committee announces its latest interest rate decision, or non-decision, which is perhaps more likely.
Let's start with the news that oil spiked yesterday. Initially, there were reports that Iran had taken seized a U.S. vessel in the Strait of Hormuz with 24 Americans aboard, raising concerns of a major international incident. Yet, later the Pentagon denied those reports and explained that the cargo ship was not a U.S. ship at all, nor did it have any Americans aboard. It turned out that the ship was the MV Maersk Tigris, a Marshall Islands-flagged vessel that U.S. officials said had gone into Iranian waters. Still, the Navy sent a destroyer and reconnaissance plane to monitor the situation and both the U.S. and Iran tried to downplay the incident.
Next up there was the American Petroleum Institute supply report that gives us a glimpse of what the EIA status report may look like today. While the headline of a 4.2 million barrel increase in crude oil supply looked bearish, the supply at the Cushing, Okla., delivery point saw stockpiles fall by 162,000 barrels. This is a small sign that the strong refiner demand and falling U.S. production may start the long process of easing the oil supply glut.
On the gasoline front, the API reported a modest build in gasoline supply of 408,000 barrels and distillates of 746, 00 barrels.