Oil price focus as UK-Iran tit-for-tat tanker seizure spat gets serious

Oil price focus as UK-Iran tit-for-tat tanker seizure spat gets serious

Oil markets are focussing this week on the political tension between the UK and Iran after their tit-for-tat spat involving the seizures of tankers escalated late on Friday.

The price of Brent crude jumped 2% to over $63.20 a barrel and any further escalation could send prices higher.

That has implications for a wide range of prices and costs — from the price of petrol to the huge energy costs for Irish food processors.

However, keeping a cap on the recovery in oil prices this year has been the trade wars unleashed between the US and China, which has slowed global economic growth and the consumption of oil, amid the best efforts of Opec and its allies to put a ceiling on output and a floor under crude oil prices.

Reflecting the rising tension in the Middle East and Gulf, stock markets in Kuwait, Dubai and Saudi Arabia fell on Sunday, a trading day.

Meanwhile, Europe’s carbon market is nearing the psychologically important threshold of €30 a ton after signs the EU will tighten rules on polluters and curtail supplies of allowances.

The value of the securities that cover greenhouse gas emissions from industry and utilities has almost doubled in the past year, finishing last week at their strongest weekly close since 2006.

That followed comments from the designated European Commission President Ursula von der Leyen placing green issues at the heart of the political agenda.

The surge in the cost of pollution along with a plunge in natural gas prices has prompted some power generators to switch away from coal to the cleaner fuel.

It’s also starting to revive debate about carbon pricing as a tool for combating climate change, eliminating years of malaise in the market that finally passed in 2018.

Crossing €30 would be a crucial milestone for the market since that is the floor price economists and experts have suggested as a minimum needed to prod industry away from the most polluting fuels.

Without putting a cost on pollution, big energy users are apt to opt for the cheapest fuel possible, which often is coal.

- Additional reporting Bloomberg

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