Oil prices rose on Thursday after Iran said it had seized a foreign oil tanker in the Gulf amid rising tensions between Tehran and the West over the safety of shipping in the Strait of Hormuz, a vital gateway for energy exports. Brent crude futures were up $0.54 at $64.20 a barrel by 1230 GMT after hitting a session high of $64.46. West Texas Intermediate crude futures were up $0.32 at $57.10 a barrel after the US benchmark hit a session high of $57.32.
Iran said the vessel, which it did not identify, was smuggling fuel and had been carrying 1 million litres, or around 6,200 barrels. It was captured near Iran’s Larak Island in the Gulf. Britain pledged to defend its shipping interests in the region and US Central Command Chief General Kenneth McKenzie said the United States would work aggressively to enable free passage after recent attacks on oil tankers in the Gulf.
The oil price reaction on Thursday shows once again that the conflict in the Middle East is far from solved and tensions could flare up any time, UBS analyst Giovanni Staunovo said. “As oil keeps flowing, prices are likely to rise only temporarily, Staunovo added. Iran said the vessel impounded was the same one it towed on Sunday after the ship had sent a distress call. US officials said on Wednesday they were unsure whether an oil tanker towed into Iranian waters had been seized or rescued.
US West Texas Intermediate crude futures were down 1 cent at $56.77. The US benchmark dropped 1.5 percent in the previous session. Oil prices have fallen this week as worries over a Middle East conflict have eased, oil production in the Gulf of Mexico has resumed after a storm and worries have emerged over Chinese economic growth. The easing of tensions between the US and Iran, mixed Chinese growth data and storm-hit operations getting back online are all pressuring oil prices downward, said Alfonso Esparza senior market analyst at OANDA.
Japan’s exports fell for a seventh straight month in June, with shipments to China falling more than 10 percent, while Japanese manufacturers’ business confidence fell to a three-year low.
On the oil supply front, data on Wednesday from the US Energy Information Administration showed a larger-than-expected drawdown in crude stockpiles last week, but traders focused on large builds in refined product inventories dragging prices down.
The International Energy Agency (IEA) is reducing its 2019 oil demand forecast due to a slowing global economy amid a US-China trade spat, its executive director said on Thursday.
The IEA is revising its 2019 global oil demand growth forecast to 1.1 million barrels per day (bpd) and may cut it again if the global economy and especially China shows further weakness, Fatih Birol said.
Last year, the IEA predicted that 2019 oil demand would grow by 1.5 million bpd but had cut the growth forecast to 1.2 million bpd in June this year. China is experiencing its slowest economic growth in the last three decades, so are some of the advanced economies … if the global economy performs even poorer than we assume, then we may even look at our numbers once again in the next months to come, Birol told media in an interview.