Oil prices nudge up as geopolitical tensions counter sluggish demand

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Reuters
KEY POINTS
  • Brent crude futures were up 7 cents, or 0.1%, at $63.46 a barrel by 0457 GMT. They rose 0.3% in the previous session.
  • U.S. West Texas Intermediate crude was 18 cents higher, or 0.3%, at $56.20 a barrel, after gaining 0.25% overnight.
Reusable: Oil storage refinery Australia Caltex Oil 141014
Jason Reed | Reuters

Oil prices edged higher on Friday on worries about Middle East tensions, offset by a flagging global economic growth outlook amid the U.S.China trade war.

Brent crude futures were up 7 cents, or 0.1%, at $63.46 a barrel by 0457 GMT. They rose 0.3% in the previous session.

U.S. West Texas Intermediate crude was 18 cents higher, or 0.3%, at $56.20 a barrel, after gaining 0.25% overnight.

“Growing challenges in the macroeconomic environment have kept bullish bets in check as risk appetites remain soft over potential weakness in global fuel demand,” said Benjamin Lu, commodities analyst at Singapore-based brokerage Phillip Futures.

A global economic growth rut risks deepening, despite expectations that major central banks will cut rates or ease policy further, according to Reuters polls of over 500 economists who remain worried about the U.S.-China trade war.

Increasing pessimism is clear from the latest polls taken July 1-24, which show the growth outlook for nearly 90% of over 45 economies polled was either downgraded or left unchanged. That applied not just to this year but also 2020.

While concerns over Middle East supply disruptions have led to recent price spikes, oil has generally been under pressure from worries about global economic growth amid growing signs of harm from the rumbling Sino-U.S. trade war over the past year.

“Bullish wagers will be held hostage to the soggy global growth outlook,” Stephen Innes, managing partner at Vanguard Markets, said in a note.

A week after Iran seized a British-flagged tanker in the Gulf, Britain has sent a warship to accompany all British-flagged vessels through the Strait of Hormuz, a change in policy announced on Thursday after the government previously said it did not have resources to do so.

U.S. Secretary of State Mike Pompeo said in a television interview on Thursday that he would go to Iran for talks if it was necessary, amid the tensions between Tehran and Washington.