Oil at seven-week high after Iran tries to block British tanker

Edmund Heaphy
Finance and news reporter
The HMS Montrose, which was involved in the incident on Thursday, escorting a ship in 2014. Photo: UK Ministry of Defence via AP

Oil prices on Thursday hovered at a seven-week high, with a potential hurricane in the Gulf of Mexico and an Iranian attempt to impede a British tanker raising fears that supply may be interrupted.

The Royal Navy said on Thursday it had intercepted an Iranian bid to block a British commercial oil tanker from leaving the Persian Gulf.

Oil futures (CL=F) rose 0.41% to well over $60 a barrel, remaining at levels not seen since May.

Three Iranian vessels attempted to prevent the British Heritage, an oil tanker operated by BP (BP), from passing the Strait of Hormuz, which is considered the world's most sensitive oil shipping choke point, according to a UK government statement.

The HMS Montrose, which had already been escorting the tanker, “was forced to position herself between the Iranian vessels and British Heritage,” the statement said, noting the vessels turned away after it issued “verbal warnings.”

“We are concerned by this action and continue to urge the Iranian authorities to de-escalate the situation in the region.”

Iran denied that it attempted to stop the tanker, with foreign minister Javad Zarif describing the UK statement as “worthless”, according to the semi-official Fars news agency.

The incident will likely heighten concerns that oil flow from the Strait of Hormuz, which averaged 21 million barrels a day in 2018, could be disrupted — something that could lead to significantly higher world energy prices.

Six oil tankers have been attacked since May near the strait, and a US drone was shot down near Iran last month.

Royal Marines, in a joint operation with Gibraltar police, last week seized a supertanker they suspected was smuggling Iranian oil to Syria in violation of EU sanctions.

Meanwhile, major oil producers evacuated workers from rigs in the Gulf of Mexico, fearing that the second storm of the 2019 Atlantic hurricane season could turn into a hurricane.

The US Energy Information Administration, meanwhile, said on Wednesday that stockpiles of American crude oil fell to their lowest level in three months.

The same day, oil pushed beyond $60 a barrel for the first time since May.