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Oil Pares Steep Weekly Loss as U.S. Says It Downed Iranian Drone


By Sharon Cho and Alex Longley

(Bloomberg) Oil snapped four days of losses after the U.S. said it downed an Iranian drone near the Strait of Hormuz, stoking concern crude flows from the Middle East may be disrupted.

Futures rose as much as 1.9% in New York, paring their steepest weekly decline since the end of May. A U.S. warship “immediately destroyed” the drone that approached the USS Boxer, President Donald Trump said on Thursday at the White House. Iran’s Deputy Foreign Minister Seyed Abbas Araghchi denied his country lost a drone.

Oil gains Friday, while futures are set to decline this week

Oil is still down about 7% this week as fears of waning demand eclipse concern that Middle East supplies could be curtailed. The U.S.-China trade spat persists, with Trump reiterating Tuesday that he could impose additional tariffs on China, where quarterly economic growth has slowed to the weakest pace since at least 1992. Meanwhile, U.S. fuel stockpiles unexpectedly expanded.

“The retreat this week is quite severe when you consider that you have all these headlines from the Persian Gulf,” said Olivier Jakob, managing director at Petromatrix GmbH. “There’s really some concern about the global balances, and to reverse that you will need to have the impression that the trade wars are over.”

West Texas Intermediate for August delivery increased 59 cents, or 1.1%, to $55.89 a barrel on the New York Mercantile Exchange as of 9:51 a.m. London time.

Brent for September settlement rose 81 cents to $62.74 a barrel on the ICE Futures Europe Exchange. The global benchmark crude traded at a premium of $6.75 to WTI for the same month.

See also: U.S. Demands Iran Release Foreign Ship, Crew Seized This Week

The Iranian drone was a threat to the U.S. ship and its crew, Trump said, as he called on other nations to protect their vessels as they go through Hormuz. Iranian Foreign Minister Mohammad Javad Zarif said earlier this week that his country could close the strait but doesn’t want to, because the waterway and the Persian Gulf are its “lifeline.”

Trump last week complained that China wasn’t living up to its promise of increased purchases of American agricultural goods. Disagreements over key demands from Trump and his Chinese counterpart, Xi Jinping, have raised doubts about whether the two nations will actually return to the negotiating table.

Other oil-market news:
  • JPMorgan Chase & Co., Barclays Plc and industry consultant RS Energy Group all signaled more pessimistic views for Brent oil prices, citing a weakening global demand picture tied to the U.S.-China trade war.
  • The OPEC+ coalition will hold its next meeting of the Joint Ministerial Monitoring Committee in Abu Dhabi on Sept. 12, according to delegates who asked not to be identified as the date hasn’t been formally announced.
  • The International Energy Agency’s executive director, Fatih Birol, said the organization is “very worried” about attacks in the Strait of Hormuz.


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