Oil surges as Strait of Hormuz shipping fears lift risk premium

The useful part

Crude oil prices closed sharply higher on Thursday as geopolitical tensions in the Middle East continued to inject a significant risk premium into the market. WTI crude settled at $77.29, up $2.07 or 2.75%, while Brent crude settled at $82.49, gaining $3.04 or 3.83%. Brent outperformed WTI as traders placed a larger premium on global supply risks tied to the Persian Gulf.

How it works

• While there has been no confirmed disruption to oil flows, the rhetoric alone was enough to reignite concerns over one of the world's most important energy chokepoints.
• Roughly 20% of global oil consumption passes through the Strait of Hormuz, making any threat to shipping a significant concern for energy markets.
• The gains also reflected continued uncertainty surrounding diplomatic efforts in the region.
• Investors are weighing the possibility of progress in negotiations against the risk that any escalation could quickly tighten global crude supplies.
• Staying below keeps the sellers more in control with the 200 day moving average at $76.08 as the next downside target.

Details worth keeping

That was just short of the falling 100 hour movie I was at $78.23. This article was written by Greg Michalowski at investinglive.com.