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.
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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.

Oil advances amid concerns in the Middle East, but weak demand outlook caps gains

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Reuters
KEY POINTS
  • Brent crude futures rose 17 cents, or 0.27%, to $63.35 a barrel by 0300 GMT, after dropping 1% overnight – the first fall in four sessions.
  • U.S. West Texas Intermediate crude were up 18 cents, or 0.3%, at $56.06 a barrel, having dropped 1.6% in the previous session.
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A truck used to carry sand for fracking is washed in a truck stop in Odessa, Texas.
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Oil prices edged higher on Thursday amid lingering Middle East tensions and after U.S. crude stocks dropped more than expected, but gains were stemmed by a fragile demand outlook amid more signs of slowing global economic growth.

Brent crude futures rose 17 cents, or 0.27%, to $63.35 a barrel by 0300 GMT, after dropping 1% overnight – the first fall in four sessions.

U.S. West Texas Intermediate crude were up 18 cents, or 0.3%, at $56.06 a barrel, having dropped 1.6% in the previous session.

“We see it as a current tug of war between the bull case of OPEC production cuts, political risk in the Gulf and the recent reduction in crude inventories, versus the bear case of slowing global growth and a ramp-up in U.S. production,” said Hue Frame, managing director at Frame Funds in Sydney.

“We think the Middle East tensions will more than likely exist for the foreseeable future. While they exist, the tug of war will more likely continue in the crude market until the economic data either deteriorates further or rebounds.”

Meanwhile, U.S. crude stocks fell by nearly 11 million barrels last week, way more than analysts’ expectations for a drop of 4 million barrels.

But oil output from seven major shale formations in the United States is expected to rise in August to a record 8.55 million barrels per day.

The overall sentiment in the oil market has darkened as investors worry that slowing global economic growth will weaken demand for oil.

A series of purchasing manager index readings in the United States and Europe were weaker than expected, confirming concerns about slower economic growth amid a trade war between the United States and China.

“Global growth concerns are driving energy prices lower as forecasts keep getting downgraded even as the U.S. will be sending a trade team to China next week,” Alfonso Esparza, senior market analyst at OANDA, said in a note.

Set against those worries are ongoing tensions in the Middle East following the seizure of a British-flagged tanker in the Gulf by Iranian forces last week.

The military adviser to Iran’s supreme leader was quoted on Wednesday as saying that any change in the status of the Strait of Hormuz, which Tehran says it protects, would open the door to a dangerous confrontation.

Britain, meanwhile, gained initial support from France, Italy and Denmark for its plan for a European-led naval mission to ensure safe shipping in the Gulf.

Correction: An earlier version of this Reuters article incorrectly described the change in U.S. crude inventories. It was, in fact, a drop of nearly 11 million barrels last week.

Oil prices edge lower as China’s GDP growth slows

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Reuters
KEY POINTS
  • Brent crude futures for September fell 21 cents to $66.51 a barrel by 0222 GMT.
  • U.S. crude for August was down 28 cents at $59.93 a barrel.
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Oil prices slipped on Monday after China posted its slowest quarterly economic growth in at least 27 years, reinforcing concerns about demand in the world’s largest crude oil importer.

Brent crude futures for September fell 21 cents to $66.51 a barrel by 0222 GMT while U.S. crude for August was down 28 cents at $59.93 a barrel. Both contracts last week posted their biggest weekly gains in three weeks on cuts in U.S. oil production and diplomatic tensions in the Middle East.

Refineries in the path of Tropical Storm Barry continued to operate despite flood threats while the storm has slashed U.S. Gulf of Mexico crude output by 73%, or 1.38 million barrels per day.

An unwinding of the risk premium from tropical storm Barry, lower oil demand forecasts and a lack of news from the Middle East may have led to a muted oil price reaction, Stephen Innes, managing partner at Bangkok-based Vanguard Markets, said.

China’s economic growth slowed to 6.2% in the second quarter from a year earlier, in line with analysts’ expectations, with demand at home and abroad faltering as the Sino-U.S. trade war bites.

Still, China’s industrial output and retail sales beat forecasts, “suggesting that the economy in China is healthier than we previously been pricing,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

In the Middle East, Iranian President Hassan Rouhani said in a televised speech on Sunday that Iran is ready to hold talks with the United States if Washington lifts sanctions and returns to the 2015 nuclear deal it quit last year.

Meanwhile Britain has offered to facilitate the release of the detained Iranian oil tanker Grace 1 if Tehran gave guarantees that it would not go to Syria.

Oil hits six-week high as storm builds in Gulf of Mexico

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Reuters
KEY POINTS
  • U.S. West Texas Intermediate (WTI) crude futures were up 34 cents, or 0.6%, at $60.77 a barrel by 0337 GMT, after earlier touching the highest since May 23 at $60.83. They gained 4.5% in the previous session.
  • Brent crude futures reversed early losses and were up 30 cents, or 0.5%, at $67.31 a barrel, after rising to as high as $67.38, the highest since May 30. They ended Wednesday up 4.4%.
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Oil futures hit a six-week high on Thursday as a storm built in the Gulf of Mexico, threatening crude output, while an incident with a British tanker in the Middle East highlighted ongoing tensions in the region.

U.S. West Texas Intermediate (WTI) crude futures were up 34 cents, or 0.6%, at $60.77 a barrel by 0337 GMT, after earlier touching the highest since May 23 at $60.83. They gained 4.5% in the previous session.

Brent crude futures reversed early losses and were up 30 cents, or 0.5%, at $67.31 a barrel, after rising to as high as $67.38, the highest since May 30. They ended Wednesday up 4.4%.

Five boats believed to belong to Iranian Revolutionary Guards approached a British oil tanker on Wednesday and asked it to stop in Iranian waters close by, but withdrew after a British warship warned them over radio, a U.S. defense official said on Thursday.

Tensions have been high in the Middle East after attacks on tankers and the downing of a U.S. drone by Iran last month, following President Donald Trump’s unilateral withdrawal from a multi-party agreement with Tehran to end its nuclear program.

U.S. oil producers on Wednesday cut nearly a third of Gulf of Mexico crude output ahead of what could be one of the first major storms of the Atlantic hurricane season.

Fifteen production platforms and four rigs were evacuated in the north central Gulf of Mexico, according to a U.S. regulator as oil firms moved workers to safety ahead of a storm expected to become a hurricane by Friday.

Oil prices were also supported by a decline in U.S. inventories. U.S. crude stocks fell 9.5 million barrels in the week to July 5, the Energy Information Administration (EIA) said, more than triple the 3.1 million-barrel draw analysts had expected as refineries ramped up output.

“There is nothing like an early start to the hurricane season to support oil prices, but looking under the hood of the EIA data, it paints an even rosier picture for U.S. oil markets,” said Stephen Innes, managing partner, Vanguard Markets in Bangkok.

“Imports down, exports likely up and refinery utilisation at yearly highs,” he said.

Stocks have now fallen for four consecutive weeks, according to the EIA.

Still, U.S. output is rising again after a brief drop from record levels, according to the EIA. Production last week rose to 12.3 million barrels a day.

“Rising U.S. shale production levels, subdued global economic momentum and existing trade uncertainties will cap bullish gains for crude oil futures,” said Benjamin Lu, analyst at Phillip Futures in Singapore.

Oil prices drop amid slowing global economy, trade disputes

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Reuters

KEY POINTS
  • Brent crude futures were down 21 cents, or 0.3%, at $63.90 a barrel by 0343 GMT. They fell 12 cents on Monday.
  • U.S. West Texas Intermediate crude futures were down 25 cents, or 0.4%, at $57.41 a barrel. They rose 15 cents in the previous session.
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A truck used to carry sand for fracking is washed in a truck stop in Odessa, Texas.
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Oil fell on Tuesday amid worries over the outlook for demand after the latest signs that international trade disputes have been dragging on the global economy, although the potential for conflicts in the Middle East offered support to prices.

Brent crude futures were down 21 cents, or 0.3%, at $63.90 a barrel by 0343 GMT. They fell 12 cents on Monday.

U.S. West Texas Intermediate crude futures were down 25 cents, or 0.4%, at $57.41 a barrel. They rose 15 cents in the previous session.

Oil prices are being pressured by ongoing worries about demand as the U.S.-China trade war, heading into its second year, dampens prospects for global economic growth, which strongly impacts oil demand growth. The countries are the world’s two largest oil consumers.

Japan’s core machinery orders fell by the most in eight months, data showed on Monday, in a sign the global trade tensions are taking a toll on corporate investment.

Japanese government figures on Tuesday also showed that real wages in the country fell for a fifth straight month. The country is the fourth-largest crude user in the world.

“The weaker global economic outlook is keeping oil prices under downward pressure, but tensions in the Middle East are enhancing awareness to possible supply risk and should keep a floor under oil in the medium term,” said Stephen Innes, managing partner at Vanguard Markets in Bangkok.

Iran on Monday threatened to restart deactivated centrifuges and step up its enrichment of uranium to 20% in a move that further threatens the 2015 nuclear agreement that Washington abandoned last year.

Washington has imposed sanctions that eliminate benefits Iran was meant to receive in return for agreeing to curbs on its nuclear program under the 2015 deal with world powers.

The confrontation has brought the United States and Iran close to conflict. Last month, U.S. President Donald Trump called off air strikes at the last minute in retaliation for Iran shooting down a U.S. drone over the Gulf, which followed attacks on two oil product tankers in the nearby Gulf of Oman by unidentified assailants.

Meanwhile, Goldman Sachs said growth in U.S. shale production was likely to outpace that of global demand at least through 2020, limiting gains in oil prices despite output curbs led by the Organization of the Petroleum Exporting Countries.

Industry and government data for release later on Tuesday and on Wednesday is expected to show that U.S. crude stockpiles fell for a fourth consecutive week, dropping 3.6 million barrels, according to a preliminary Reuters poll.