Yemisi Izuora
Oil prices rose on Friday, with Brent crude heading for its first weekly gain in five weeks on tensions in the Middle East after Iran shot down a US military drone and on hopes for a drop in US interest rates that may stimulate global growth.
While US President Donald Trump played down the destruction of the drone, tensions remain high after the latest incident in the Gulf, which followed tanker attacks last week that raised concerns about crucial oil supplies being disrupted.
The demand-side picture has also improved, with expectations that the US Federal Reserve will cut interest rates at its next meeting and with plans by Beijing and Washington to resume talks to resolve a trade war that has hit economic growth prospects.
Brent crude was up 39 cents, or 0.6 per cent, at $64.84 a barrel after rising 4.3 per cent on Thursday and is heading for a weekly gain of more than 4 per cent after four weeks of decline.
Also, the US West Texas Intermediate, WTI, crude was up 32 cents, or 0.6 per cent, at $57.39 a barrel. The US benchmark rose 5.4 per cent on Thursday and is on track for a nearly 10 per cent increase this week.
Potential supply “disruptions have boosted energy prices combined with the dollar weakness after the Fed signalled an interest rate is near,” Alfonso Esparza, senior market analyst at OANDA, said in a note.
A weaker greenback tends to support oil prices because crude is usually priced in dollars.
“Trade anxiety has died down, pushing energy prices higher as global growth will not be pressured by a prolonged tariff war,” Esparza said.
Concern about slowing economic growth and a US-China trade dispute had pulled oil lower in recent weeks. That came after Brent reached a 2019-high above $75 in April.
Trump said on Thursday he suspected the drone was shot down by mistake and that “it would have made a big difference” to him if the remotely-controlled aircraft had been piloted.
While the comments appeared to suggest Trump was not eager to escalate the latest in a series of incidents with Iran, he also warned that: “This country will not stand for it”.
Tehran said the unarmed Global Hawk surveillance drone was on a spy mission over its territory, but Washington said it was shot down over international airspace.
Several top US House Republicans said on Thursday the United States must undertake a “measured response” to Iran.
Tension has been rising in the Middle East, home to over 20 per cent of the world’s oil output, after attacks on two tankers near the Strait of Hormuz, a chokepoint for oil supplies.
Washington blamed Tehran for the tanker attacks and Iran denied any role.
A drop in US crude inventories has also supported prices.