Traders credited US President Donald Trump’s threats to sink Iranian patrol boats in the Persian Gulf for the sharp increase in oil futures, just days after lack of storage and low demand drove the US benchmark WTI below zero.

June contracts for West Texas Intermediate crude went for $16.87 a barrel on the New York Mercantile Exchange on Thursday, rising 19 percent for the second straight day. Brent crude, the international benchmark, was also up by almost five percent to $21.33 a barrel. This comes after May WTI contracts traded for -$37.63 a barrel on Monday.

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International analysts and oil brokers alike attributed the rise in part to Trump’s aggressive rhetoric towards Tehran.

“Threats of war have always been an important factor in increasing the oil prices,” Hamidreza Azizi, visiting fellow at the German Institute for International and Security Affairs (SWP), told RT earlier.

Trump’s revelation that he had ordered the US Navy to sink Iranian patrol boats if threatened “boosted the possibility of renewed tension in the Middle East, a major oil producing region, which traders always translate to reductions in the region’s production and exports if things escalate,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy, in a daily research note quoted by MarketWatch.

However, most were convinced that the threat of actual war between the US and Iran remained relatively low.

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While the price of WTI futures was driven mostly by a glut of oil in warehouses and depressed demand due to coronavirus lockdowns across the US, the global index had taken a beating from a price war initiated by Saudi Arabia ostensibly against Russia, with US shale producers catching the brunt of the fallout.

The war ended in a tentative truce last week, as OPEC, Russia and other oil producers agreed on cutting production by 10 million barrels a day, starting in May. With no end in sight to Covid-19 shutdowns from the US and Europe to India, however, the demand is likely to stay low.

“The storm for oil isn’t over but at least for the time being it is less volatile than the headline-grabbing moves of the last few days,” noted Carlo Alberto De Casa, chief analyst at ActivTrades, but added that in the long-term he sees the need for further production cuts from the Organization of Petroleum Exporting Countries (OPEC) and others.

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