Oil prices rise amid Gulf of Mexico storm, West Asia tensions

Cornelia Mascio
Luglio 12, 2019

Tensions in West Asia worsened today after gunboats of the Iranian Revolutionary Guards asked a British oil tanker to stop in Iranian waters, but later withdrew following warning from a British warship warned, U.S. officials said.

At 1625 IST, the July crude contract on MCX was 1% higher at 4,157 rupees a bbl and the August delivery contract on NYMEX was 0.5% higher at $60.73 a bbl.

Both benchmarks hit their highest prices since late-May.

There was no follow-through to the downside earlier in the session after yesterday's reversal to the downside was fueled by an OPEC forecast of slower demand for its crude oil next year.

On the storm watch end, US oil producers cut almost a third of the crude output from the Gulf of Mexico ahead of Tropical Storm Barry, which was headed for an already water-logged New Orleans, where it was forecast to make landfall by late Friday or early Saturday as the first Atlantic hurricane of the 2019 season. USA crude stocks fell 9.5 million barrels in the week to July 5, the Energy Information Administration (EIA) said, a drop that was more than triple the 3.1 million-barrel draw expected by analysts.

Meanwhile, distillate stockpiles increased by 3.7 million barrels, beating forecasts for an increase of 0.74 million barrels. This also marked the fourth consecutive weekly decline.

Oil has been rallying in the past week, with Iranian tensions escalating after the British navy intervened to stop the country from blocking an oil tanker leaving the Persian Gulf.

Keeping a lid on prices are two independent reports calling for lower demand. OPEC said the world would need 29.27 million bpd of crude from its 14 members in 2020, down 1.34 million bpd this year.

Early Friday, the International Energy Agency (IEA) expects the return of an oversupplied oil market next year, despite the OPEC-led pact created to cut production and stabilize prices.

Phillips 66 said it expected to complete the closing of its 253,600-barrel-per-day Alliance, Louisiana, refinery because of the storm threat, Reuters reported.

However, an International Energy Agency (IEA) forecast for a global oil surplus capped the gains.

"Clearly, market tightness is not an issue for the time being and any rebalancing seems to have moved further into the future".

Last week OPEC agreed in Vienna to continue with cuts in production until the first quarter of next year in order to keep prices stable.

The demand concerns are a longer-term issue.

The market was also bolstered by the news that a tropical cyclone is likely later this week in the Gulf of Mexico, raising concerns over potential disruptions to oil and natural gas production in the region.

Brent prices have climbed 4.5% this week while WTI prices have gained 5.5%.

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