Oil Prices Slack After Previous Session Gains

..As OPEC Cut Global Oil Demand Forecast 

Yemisi Izuora 

Oil fell on Friday after sharp gains in the previous session when prices were boosted after attacks on two oil tankers in the Gulf of Oman stoked concerns of reduced crude flows through one of the world’s key shipping routes. 

The attacks near Iran and the Strait of Hormuz countered concerns about global demand that had hammered prices in recent weeks, analysts said.

It was the second time in a month tankers have been attacked in the world’s most important zone for oil supplies, amid rising tensions between the United States and Iran. Washington quickly blamed Iran for Thursday’s attacks, but Tehran bluntly denied the allegation.

Brent crude futures were down 17 cents, or 0.3 per cent, at $61.14 a barrel after they settled up 2.23 per cent on Thursday, at $61.31, having risen as much as 4.5 per cent.

The U.S. West Texas Intermediate crude futures were down 39 cents, or 0.8 per cent at $51.89 a barrel. They closed 2.23 per cent higher at $52.28 a barrel in the previous session, having also risen as much as 4.5 per cent.

“The drums of war are beating and driving asset prices,” Greg McKenna, strategist at McKenna Macro said in a morning note.

Tensions in the Middle East have escalated since U.S. President Donald Trump withdrew from a 2015 multinational nuclear pact with Iran and reimposed sanctions, especially targeting Tehran’s oil exports.

Iran, which has distanced itself from the previous attacks, has said it would not be cowed by what it called psychological warfare.

U.S. Secretary of State Mike Pompeo said the United States has assessed Iran was behind the attacks on Thursday, and arrived at its conclusion based on intelligence, weapons used and the level of expertise needed.

Iran “categorically rejects the U.S. unfounded claim with regard to 13 June oil tanker incidents and condemns it in the strongest possible terms,” the Iranian mission to the United Nations said in a statement on Thursday evening.

Meanwhile, the Organization of Petroleum Exporting Countries, OPEC, on Thursday cut its forecast for growth in global oil demand due to escalating trade disputes and pointed to the risk of a further reduction, building a case for prolonged supply restraint in the rest of 2019.

The OPEC, said in its monthly report, that World oil demand will rise by 1.14 million barrels per day this year, 70,000 bpd less than previously expected.

“Throughout the first half of this year, ongoing global trade tensions have escalated,” OPEC said in the report. “Significant downside risks from escalating trade disputes spilling over to global demand growth remain.” 

OPEC, Russia and other producers have implemented a deal since January 1 to cut output by 1.2 million bpd. They meet on June 25-26 or in early July to decide whether to extend the pact.

The Vienna-based OPEC also said its output fell in May as U.S. sanctions on Iran added to the impact of the supply-cutting pact. Production by all 14 OPEC members dropped by 236,000 bpd to 29.88 million bpd, OPEC said.

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