Mounting tensions with Iran, China leave oil prices in flux

NEW YORK >> A rare mix of geopolitical tensions in the Middle East and China is tugging oil prices in opposite directions and creating uncertainty over where they might land.

Deteriorating trade talks between the United States and China, the world’s two largest economies, are posing a serious threat to global economic growth and whenever that growth sputters, demand for oil and gasoline typically craters.

But escalating tensions in the Middle East and elsewhere could threaten oil supply, which could push the price of oil and gasoline higher. In the past week, the United Arab Emirates has alleged four oil tankers off its east coast were targeted in sabotage attacks. At the same time, Saudi Arabia has accused Iran of being behind a drone attack that shut down a key oil pipeline in the kingdom.

Meanwhile, the U.S. has dispatched warships and bombers to the region to counter an alleged threat from Iran, whose economy is reeling from President Donald Trump’s decision last year to withdraw the U.S. from the 2015 nuclear accord and impose widereaching sanctions.

“Tensions are high, and I think the chance of further escalation is probably pretty good as well,” said Ryan Fitzmaurice, energy strategist at Rabobank. “If any of these issues flare up, prices could increase sharply...If you have a major attack on a Saudi production facility or Saudi tanker, we could see prices increase quite dramatically overnight.”

There already were concerns about constraints on oil supply. Last month, Trump decided to impose sanctions on nations that were importing oil from Iran, taking about 1 billion barrels of oil off the market by some estimates. Production in Venezuela, once one of the world’s largest oil

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AP PHOTO/RICH PEDRONCELLI, FILE A motorist puts gas in his car at a Shell station in Sacramento, Calif. Escalating tensions in the Middle East and elsewhere could threaten oil supply, which could push the price of oil and gasoline higher.