Brent oil headed for its biggest weekly gain since mid-February as OPEC and its allies gather this weekend to consider output policy and political tensions in the Persian Gulf escalate.
Futures have added 3.5% in London this week. Saudi Arabia, Russia and other major producers in the OPEC+ coalition will assemble in Jeddah over the next few days, while U.S. sanctions squeeze exports from fellow member Iran. Regional friction is growing, as the Saudis said two oil tankers were targeted and accused Iran of ordering a drone attack on their fuel pumping stations, spurring concern of conflict between America and the Islamic Republic.
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.
“I think the market’s going to tighten significantly,” Amy Myers Jaffe, a senior fellow at the Council on Foreign Relations in New York, said in a Bloomberg television interview. “These acts of sabotage can be pretty destructive, and that’s on top of news reports that Venezuelan output’s been cut” and “you have the Iranian oil coming out of the market.”
Brent for July settlement rose 46 cents to $73.08 a barrel on the London-based ICE Futures Europe exchange at 11:17 a.m. after closing 1.2% higher on Thursday. It’s up 3.5% so far this week, the largest gain since Feb. 15. The global crude benchmark traded at a $9.45 premium to West Texas Intermediate for the same month.
WTI crude for June delivery was up 58 cents, or 0.9%, to $63.45 a barrel on the New York Mercantile Exchange. The contract settled 1.4% higher on Thursday and has advanced 2.9% since May 10, on track for the biggest gain since the week ending April 5.
Still, prices remain capped by concerns that global oil demand growth is faltering, and could be weakened further by the trade war between the U.S. and China.
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 Donald Trump’s recent approach, according to commentaries run by state media outlets Friday.
Other oil-market news: Oil traders are starting the slow process of cleaning up cargoes of Russian crude that were loaded onto tankers at a port in the Baltic Sea during a contamination crisis. As the U.S. and China hit each other with commodity tariffs, other nations are reaping the benefits. Total SA had an eye on Anadarko Petroleum Corp.’s assets in Africa for over a year, Chief Executive Officer Patrick Pouyanne said.