Oil rises after US Navy destroys Iranian drone

Andrew Cummings
July 21, 2019

Oil is still down about 7% this week as fears of waning demand eclipse concern that Middle East supplies could be curtailed.

At 06:21 a.m. EDT on Friday, WTI Crude was up 1.37 percent at $56.18, and Brent Crude had jumped 1.74 percent at $63.01.

Iran's Deputy Foreign Minister Seyed Abbas Araghchi denied the loss in a tweet, joking the United States might have shot down a drone of its own.

Oil recovered from one-month lows scored on Thursday and moved back to $56.00/bbl amid reports that Iran seized a United Kingdom ship in the Gulf of Oman. An unarmed Iranian navy Bell 212 helicopter flew close to the Boxer, coming close to the ship's deck before a U.S. helicopter was able to "chase" it away, the official said.

"The biggest factor driving oil prices today is the Iran- U.S. tension story", says Phil Flynn, senior market analyst at Price Futures Group Inc.

"It appears that there are growing concerns on the oil market about a renewed oversupply".

Gains are also being supported by indications that the U.S. Federal Reserve will cut rates aggressively to support the economy.

Drillers cut five oil rigs in the week to July 19, bringing the total count down to 779, the lowest since February 2018, according to Baker Hughes.

Two influential Federal Reserve officials sharpened the public case for acting to support the US economy on Thursday, reviving bets the central bank may deliver a larger-than-expected cut this month, although bets on a larger rate cut were pared back on Friday. It was the second consecutive increase.

Warren Patterson, head of commodities at ING, added, "Macroeconomic concerns, uncertainty on trade discussions and increasing oil supply from the USA continued to weigh on sentiment".

Slowing oil demand growth and a persistent global glut will cap oil prices and keep them from rising too much, barring serious escalations in geopolitical tensions, Fatih Birol, the executive director of the International Energy Agency (IEA), said on Friday. -China trade spat, and may cut it again if the global economy and especially China shows further weakness, Birol told Reuters on Thursday.

"Macroeconomic concerns, uncertainty on trade discussions and increasing oil supply from the US continued to weigh on sentiment", said Warren Patterson, head of commodities at ING.

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