Oil headed for a weekly increase as a storm in the Gulf of Mexico and simmering Middle East tensions supported the market, though the outlook remained clouded by concerns of a renewed supply surplus.
Futures were trading above $60 a barrel in New York on Friday, leaving this week’s increase at 4.8%. Tropical Storm Barry, which could hit the Louisiana coast on Saturday, has already curbed about half of the energy output in the Gulf.
Meanwhile Iran’s attempt to block the passage of a British tanker in the Strait of Hormuz ratcheted up tension in the oil-rich Persian Gulf, and U.S. data showed a drop in American crude stockpiles to the lowest level in almost three months.
While there are risks to supply in the short term, further out the picture looks different. The Organization of Petroleum Exporting Countries warned Thursday of a glut in 2020 as U.S. shale production surges.
The International Energy Agency said Friday there had been a surprise pile-up of inventories in the first half of this year, and that OPEC may need to cut output to the lowest in 17 years to prevent another overhang.
“The tropical storm that is brewing in the Gulf of Mexico” along with “the tensions between Iran and the U.K. over the seizure of an oil tanker” are supporting prices, said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt.
West Texas Intermediate crude for August delivery gained 10 cents to $60.30 a barrel on the New York Mercantile Exchange as of 1:43 p.m. London time.
Brent for September settlement rose 32 cents, or 0.5%, to $66.84 a barrel on the ICE Futures Europe Exchange. Prices are up 4% this week. The global benchmark crude traded at a $6.48 premium to WTI for the same month.
Tropical Storm Barry, which was about 95 miles (153 kilometers) southwest of the Mississippi River’s mouth as of 5 a.m. New York time, may drop as much as 25 inches of rain in some places, according to an advisory from the U.S. National Hurricane Center.
Gulf of Mexico operators have shut-in 1.01 million barrels a day of oil production because of the storm, the Bureau of Safety and Environmental Enforcement said in a notice.
The U.K. government said earlier this week that the British Navy intervened to stop Iran from blocking a BP Plc oil tanker in the Strait of Hormuz -- the world’s most important oil choke-point. While Iran’s Revolutionary Guard Corps denied trying to impede the tanker, the incident follows the seizure by Britain of a vessel carrying Iranian oil, which prompted Iran to vow retaliation.
© 2019 Bloomberg L.P.