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Oil Heads for Weekly Gain as Supply Risks Buoy Fragile Market


By Grant Smith and Tsuyoshi Inajima

(Bloomberg) 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 surplus.

Futures rose 0.5% in New York on Friday, pushing this week’s increase above 5%. 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.

WTI rises as a tropical storm threatens to disrupt output

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 27 cents to $60.47 a barrel on the New York Mercantile Exchange as of 11:18 a.m. London time.

Brent for September settlement rose 42 cents, or 0.6%, to $66.94 a barrel on the ICE Futures Europe Exchange. Prices are up 4.2% this week. The global benchmark crude traded at a $6.44 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 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.

Other oil-market news:
  • World oil supply exceeded demand at a rate of 900,000 barrels a day during the first six months of 2019 as consumption proved far weaker than expected amid a faltering economy, the IEA said.
  • OPEC estimated that its members are producing about 560,000 barrels a day more than will be needed next year. Supplies from producers outside the cartel will grow by more than twice as much as global oil demand, it forecast.
  • Saudi Arabia is fulfilling its pledge to make deeper cuts in oil output than the OPEC+ agreement requires, according to the first indication of the kingdom’s production since the supplier group extended curbs earlier this month.
  • Two vessels carrying European gasoline are discharging in Venezuela this week to lessen a shortage that was about to get worse after shutdowns at the country’s largest oil refineries.


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