21 Jun

US-Iran Tension: What Does It Mean for Oil?

WRITTEN BY Rabindra Samanta

US-Iran tension

On June 20, after US military drone was shot down in the Middle East, President Trump decided to strike Iran. However, he reversed his decision. The potential for a war between Iran and the US still looms. President Trump called Iran’s act of shooting down the US drone a “very big mistake.”

US-Iran Tension: What Does It Mean for Oil?

Oil rose after Iran shot US drone

After Iran shot down a US drone, US crude oil August futures rose 5.7% on June 20 and settled at $57.07 per barrel. In the trailing week, US crude oil active futures rose 8.6%. Oasis Petroleum (OAS) and California Resources (CRC), the strongest oil-weighted stocks, rose 18.9% and 10.9%. Oasis Petroleum and California Resources operate with a production mix of 72% and 74.4% in oil price-linked commodities. The United States Oil ETF (USO), which holds active US crude oil futures, has risen 8.9% in the trailing week. In June USO has risen 6.8%—almost on par with US crude oil’s rise.

Oil heading for a record gain

As of 5:05 AM ET on June 21, US crude oil active futures were at $57.25, which is ~9% higher than the closing level the previous week. If US crude oil prices stay at these levels today, they will mark the highest weekly close since December 2, 2016.

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