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Oil climbs as Middle East tensions offset demand worries

20 July 2019

Earlier in the week, crude oil prices fell sharply after the US said it would begin talks with Iran about its nuclear missile program.

Prices gained late in the session after Iran's Revolutionary Guards said they had captured a British-flagged oil tanker in the Gulf after Britain seized an Iranian vessel earlier this month, further raising tensions along a vital global oil shipping route.

Britain pledged to defend its shipping interests in the Middle East, while U.S. 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.

West Texas Intermediate (WTI) crude oil finished Friday with small gains, following five consecutive daily losses. Iran's Deputy Foreign Minister Seyed Abbas Araghchi denied his country lost a drone.

Brent for September settlement rose 15 cents to $62.08 a barrel on the ICE Futures Europe Exchange.

But traders anxious about a world swimming in oil with less and less demand seem doggedly determined to not be swayed by news that should by all counts please them, such as USA energy firms this week reducing the number of oil rigs operating for a third week in a row.

Two influential Federal Reserve officials sharpened the public case for acting to support the US economy on Thursday, reviving bets the central bank may deliver a larger-than-expected cut this month.

Slowing oil demand growth and a persistent global glut will cap oil prices and keep them from rising too much, barring serious escalations in geopolitical tensions, Fatih Birol, the executive director of the International Energy Agency (IEA), said on Friday.

They will not bring a major change in the current markets but will be helpful in the medium and longer term.

"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 Reuters in an interview.

"Macroeconomic concerns, uncertainty on trade discussions and increasing oil supply from the USA continued to weigh on sentiment", said Warren Patterson, head of commodities at ING.

Oil climbs as Middle East tensions offset demand worries