Oil prices jump as Trump threatens Iran but stockpiles soar
U.S. oil prices rebounded Wednesday after President Trump tweeted that he ordered the Navy to destroy Iranian ships that harass U.S. vessels, but U.S. inventories surged above forecasts as storage capacity fills up.
The tweet came a week after Iran's Islamic Revolutionary Guard Corps Navy came dangerously close to U.S. ships in the Persian Gulf.
The Strait of Hormuz in the Gulf is a key choke point for crude exports coming out of the region. In early January, oil prices spiked after a U.S. drone strike killed a top Iranian military commander, prompting Tehran to launch ballistic missiles at bases in Iraq where U.S. troops were stationed.
The West Texas Intermediate futures contract for June delivery came off earlier highs but settled 19% higher at $13.78 per barrel, after diving 43% Tuesday. Brent crude oil prices rose 5% to $20.25.
The jump in June oil prices comes after the May delivery contract fell into the negative Monday for the first time in history before expiring on Tuesday.
"Oil is rising on Trump's tweet that the US Navy should shoot down any Iranian gunboats that pose a threat," said Oanda analyst Edward Moya in an email to IBD. "Combined with a broad risk-on rebound in equities, energy traders are using Trump's tweet as an excuse to temporarily abandon their bearish positions."