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For the second time in a month two oil tankers came under attack in international waters near the strategic Strait of Hormuz. One ship, a Japanese-owned tanker carrying methanol, was apparently attacked by limpet bombs attached to its hull or by a mine. The second ship, owned by Norway’s Frontline and carrying naphtha, was apparently hit by a torpedo. The attacks come just a day after Iranian-backed forces in Yemen fired a missile at an airport in Saudi Arabia. And they were timed to coincide with the visit of Japanese Prime Minister Shinzo Abe to Tehran in an attempt to lower tensions in the region between the United States and Iran. U.S. Secretary of State Mike Pompeo blamed Iran or Iranian proxies for the attack. The Iranian government disclaimed involvement and suggested that “other regional players,” which in this situation was probably meant to indicate Saudi Arabia or the United Arab Emirates, might have staged the attack in order to provoke hostilities between the United States and Iran.

As you’d expect, oil prices moved up today but not by as much as you might think after yesterday’s tumble in oil. U.S. benchmark West Texas Intermediate climbed 1.80% to $52.06 a barrel. International benchmark Brent was up 2.15% to $61.26 a barrel. The gains weren’t enough to make up for yesterday’s drop of 4% and 3.89%, respectively in the two benchmarks. That disparity is an indicator of how deep worries are about a slowing global economy and last week’s increase in U.S. oil inventories.

The fact that this is the second set of attacks in a month does argue that the conflict between Iran, on one side, and the United States and Saudi Arabia on the other, is still escalating. I think this quote from Ali Vaez, senior Iran analyst for the International Crisis Group, sums up the situation: “This is a way station to a wider conflict breaking out between Iran and the United States,” he told the Washington Post. “If Iran was behind it, it is very clear the maximum pressure policy of the Trump administration is rendering Iran more aggressive, not less. If Iran was not behind it, then it’s clear some other actor in the region could be trying to engineer a Gulf of Tonkin incident. Spoilers might be concerned the mediators are succeeding in reducing tension and be trying to put them back onto a collision course.” (The Gulf of Tonkin incident took place off the coast of North Vietnam in August 1964 and was used by the Johnson Administration to justify increased U.S. involvement in the Vietnam War.)

The restrained move up today after the big drop yesterday tells us something about how financial assets might behave in a deeper crisis and which assets, if any, you might want to own in preparation for such a crisis.

Use today’s 1.80% gain in West Texas Intermediate and the 2.15% climb in Brent crude as your benchmark.

The U.S. Oil Fund ETF (USO), which attempts to track the price of the oil commodity, tracked Brent almost exactly climbing 2.16% on the day.

The Energy Select Sector SPDR ETF (XLE), which tracks the price of oil stocks, gained 1.22%. That looks to be largely the result of underperformance on the day by the big international oil majors. ExxonMobil (XOM) gained only 0.88% on the day and Chevron (CVX) was up even less at 0.59%.

To beat the gains in the price of oil, you have to look to U.S. oil shale producers and specifically to producers whose finances are the subject of enough worry enough so that their stocks really respond to shifts in oil prices, up and down. So a relatively financially strong oil shale stock like Pioneer Natural Resources (PXD) was up only 1.32%, but Parsley Energy (PE), which has more exposure to worries about oil shale sector finances (and which is frequently mentioned as a buyout candidate) gained 3.13%. Diamondback Energy (FANG) climbed 2% and Concho Resources (CXO) was ahead 2.26%.

For context the Standard & Poor’s 500 index closed up 0.14% today and the Dow Jones Industrial Average was higher by 0.13%. The NASDAQ Composite ended ahead 0.34% for the day and the Russell 2000 closed with a gain of 0.95%.

Options on some of these oil assets would give you more leverage to any upside resulting from a deeper disruption of oil traffic through the Strait of Hormuz, but timing any future breakdown in oil traffic is very difficult so you’d have to buy relatively long-dated options, I think. Added to the difficulty is the somewhat odd behavior of those options on today’s move up. The September 20, 2019 $155 call options on Pioneer Natural Resources, for example, actually fell 16.04% today. Was that disappointment that the stock, which closed at $143.25 today, didn’t move more strongly higher on the news?

More interesting on today’s action were the September 20 $17.50 call options on Parsley Energy (PE), up 15.33% today and the January 17, 2020 $20 call options, up 7.14% today. Parsley options have the added advantage that they’re a play on both the price of oil and the possibility that Parsley will be an acquisition target. Parley Energy shares closed at $17.45 today.

The movement on the calls on the U.S. Oil Fund (USO) was also interesting today. The September 20 $11 call options were up 16.67% today. U.S. Oil Fund closed at $10.88 today.

I suspect that some of the odd or relatively restrained options action today came from a sense that oil, which was on the verge of breaking below $50 a barrel for West Texas Intermediate after yesterday’s action, may still be locked in a supply/demand downtrend that will resume after the flutter on today’s attacks is over. Some of these options, those on Parsley and U.S. Oil Fund in particular do look interesting, but like the market in general I want to see what the trend for oil prices looks like at least tomorrow and maybe into next week before committing any cash.

I’ll be following these potential options plays on my subscription sites and and if I make a buy call it will be posted in my Volatility Portfolio on those sites.

Parsley Energy and Pioneer Natural Resources are members of my online portfolios.