It looks set to be a positive end to the week for Australian energy producers such as BHP Group Ltd (ASX: BHP), Oil Search Limited (ASX: OSH), and Woodside Petroleum Limited (ASX: WPL) after oil prices surged higher overnight.
According to Bloomberg, the WTI crude oil price jumped 5.4% to US$56.65 a barrel and the Brent crude oil price rose 4.5% to US$64.59 a barrel.
What happened?
Oil prices made their largest 24-hour gain of the year after tensions between the United States and Iran escalated.
Things became tense last week when the United States claimed that Iran attacked the Japanese Kokuka Courageous and the Norwegian Front Altair commercial tankers in the Gulf of Oman.
Overnight, tensions escalated further after the United States government revealed that Iran had shot down an American drone over international waters.
Furthermore, Iran-backed Houthi rebels in Yemen said they attacked a Saudi Arabian power plant with a cruise missile. This was the third such attack on the country's infrastructure in the space of a week.
These tensions, combined with President Trump's upcoming meeting with Chinese president Xi Jinping at the G20, have given oil a much-needed boost.
In fact, earlier this month trade war tensions and global growth concerns led to oil prices sinking into a bear market, putting pressure on the likes of Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO).
But things are looking a lot more positive for the black gold now.
Michael Hiley, head of over-the-counter energy trading at LPS Futures in New York, told Bloomberg: "The Iran conflict isn't going away any time soon. If you combine that with Trump and Xi making nice — they are at least saying the right things — then that's certainly going to prop up [the oil market]."
He added: "Certainly there are some buying bullets out there; there's some dry powder. You can't be short in this market."
