Sun, Jun 16, 2019 - Page 14 News List

Crude falls as demand fears blunt tanker attacks


An Iranian firefighting boat puts out a fire on the Norwegian tanker Front Altair following a suspected attack in the Gulf of Oman on Thursday.

Photo: AFP / Tasnim

Oil posted a weekly decline as the escalating US-China trade dispute and swelling US stockpiles overshadowed tanker attacks in the Middle East.

Futures settled up 0.4 percent in New York on Friday, but still closed the week down 2.7 percent.

London-traded contracts slid for a fourth straight week.

The White House blamed Iran for tanker attacks near the Strait of Hormuz, the biggest global chokepoint for oil flows.

Meanwhile, the International Energy Agency said global supplies would swamp demand next year, further pressuring OPEC.

US crude stockpiles last week climbed to their highest since July 2017, sending futures to the lowest in almost five months.

The accumulation of excess supply runs counter to seasonal trends and adds to anxiety over the demand implications of the trade dispute, said Bill O’Grady, chief market strategist at Confluence Investment Management LLC in St Louis, Missouri.

“We’re seeing a backup in inventory, but what’s really crippling the market are demand concerns,” O’Grady said. “There is a negative effect for the world economy from the trade tensions.”

The market’s muted reaction to the tanker attacks might be because “there’s no way” Iran could fully halt the flow of crude through the Strait of Hormuz, said Michael Hiley, head of over-the-counter energy trading at LPS Futures in New York.

“A couple of mines on boats that are carrying things other than crude oil, is that really going to stop the flow of crude?” he said.

While a war in the Middle East would disrupt energy flows, the region is less important for global crude markets than it was a couple of decades ago due to the rise of US shale production.

Unless the situation escalates dramatically, the prospect of a prolonged trade spat between the US and China — the world’s two biggest economies — probably remains the key price driver.

West Texas Intermediate (WTI) for July delivery on Friday closed up US$0.23 at US$52.51 a barrel on the New York Mercantile Exchange, down 2.74 percent for the week. Prices have advanced 16 percent year to date.

Brent for August settlement rose US$0.70 to US$62.01 on London’s ICE Futures Europe exchange, down 2 percent for the week.

The global benchmark crude on Friday traded at a US$9.24 premium to WTI for the same month.

US officials released images that they said show Iran was involved in Thursday’s attacks on the tankers.

British Secretary of State for Foreign and Commonwealth Affairs Jeremy Hunt said the incidents posed a serious danger to the region and that it was almost certain that Iran’s Islamic Revolutionary Guard was involved.

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