Oil Set for Largest Weekly Gain Since Early April
(Bloomberg) -- Oil headed for its biggest weekly gain since early April as flaring tension in the Middle East took precedence over an escalating trade war between the world’s two biggest economies.
Futures in New York were little changed Friday and are up 2.1% so far this week. Saudi Arabia on Thursday accused Iran of ordering a drone attack on its fuel pumping stations this week. President Trump is wary of drawing the U.S. into a war with Iran, although there’s division in his administration over how to approach the Islamic Republic, according to people familiar with the matter.
The recent attacks on oil tankers and pumping stations have highlighted how disruptive a major war in the Middle East would be to crude flows. Supply cuts by the Organization of Petroleum Exporting Countries and its allies -- which had been the big price driver earlier in the year -- have taken a back seat to the crisis, although a meeting of the group this weekend will be closely watched for clues on whether they will be extended. On the demand side, an escalating U.S.-China trade war is jeopardizing global growth prospects.
“Oil prices are reacting positively to the possibility of additional supply from political tensions in the Gulf,” said Ahn Yea Ha, an analyst at Kiwoom Securities Co. in Seoul. “Supply fears are likely to counter demand concerns coming from the trade war” until there’s a clearer sign from the OPEC+ coalition on the output curbs, she said.
West Texas Intermediate crude for June delivery was up 12 cents, or 0.2%, to $62.99 a barrel on the New York Mercantile Exchange at 8:01 a.m. in London. The contract settled 1.4% higher on Thursday and has advanced 2.1% since May 10, on track for the biggest gain since the week ending April 5.
Brent for July settlement lost 1 cents to $72.61 a barrel on the London-based ICE Futures Europe exchange after closing 1.2% higher on Thursday. It’s up 2.8% so far this week. The global crude benchmark traded at a $9.46 premium to WTI for the same month.
Tension between Iran and the U.S. and its ally Saudi Arabia have been rising since the White House ended waivers that allowed some countries to keep buying Iranian oil.
The “terrorist acts, ordered by the regime in Tehran, and carried out by the Houthis, are tightening the noose around the ongoing political efforts,” Prince Khalid Bin Salman, Saudi Arabia’s vice minister for defense and the brother of the nation’s de facto ruler, said on Twitter without providing evidence. His comments came as Saudi-led forces launched retaliatory airstrikes against Houthi positions in Yemen.
The chances of Washington and Beijing getting trade discussions back on track and averting a full-blown tariff war appear increasingly dim. China is not interested in talking with the U.S. for now as it sees little “sincerity” in President Trump’s recent approach, according to commentaries run by state media outlets Friday.
--With assistance from James Thornhill. To contact the reporter on this story: Sharon Cho in Singapore at firstname.lastname@example.org. To contact the editors responsible for this story:
Serene Cheong at email@example.com Andrew Janes
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