Oil set for weekly gain on threat of Mideast supply disruptions

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UPDATE 6-Oil set for weekly gain on threat of Mideast supply disruptions

* Lower Iran exports and OPEC cuts support prices

* North Sea supply cuts support Brent

* OPEC-led panel meets on Sunday to review supply pact

* Coming Up: Baker Hughes' weekly oil rig count at 1 p.m.EDT (Adds comments, latest on Iran, U.S-China trade talks, updatesprices, changes dateline; previous LONDON)

By Devika Krishna Kumar

NEW YORK, May 17 (Reuters) - Oil prices steadied on Friday,with both benchmarks on track for a weekly gain on risingconcerns over potential further supply disruptions in MiddleEast shipments due to U.S.-Iran political tensions.

Iran said on Friday it could "easily" hit U.S. warships inthe Gulf, the latest in days of sabre-rattling betweenWashington and Tehran, while its top diplomat worked to counterU.S. sanctions and salvage a nuclear deal denounced by PresidentDonald Trump. urn:newsml:reuters.com:*:nL5N22T3TC

U.S. sanctions on Iran have already cut the OPEC member'scrude exports further in May, adding to supply curbs implementedthrough an OPEC-led pact for the first six months of the year.

Brent crude LCOc1 was up 5 cents at $72.67 a barrel by11:21 a.m. EDT (1521 GMT). The global benchmark was set to risenearly 3 percent this week, having ended last week largelysteady and fallen the week before.

U.S. West Texas Intermediate crude CLc1 added 48 cents to$63.35, and was on track for a weekly gain of about 2.7 percent.

"Despite what we view as a balanced oil market bothdomestically and globally, oil pricing is apparently stillsensitive to evolving developments in the Persian Gulf whereoccasional minor military events are slowly cranking upgeopolitical risk premium," said Jim Ritterbusch, president ofRitterbusch and Associates.

Iran's foreign ministry on Friday rejected accusations bySaudi Arabia that Tehran had ordered an attack on Saudi oilinstallations claimed by Yemen'sIran-aligned Houthi militia. urn:newsml:reuters.com:*:nL5N22T3YJ

Iran's elite Revolutionary Guards (IRGC) are "highly likely"to have facilitated attacks last Sunday on four tankersincluding two Saudi ships off Fujairah in the United ArabEmirates, according to a Norwegian insurers' report seen byReuters. urn:newsml:reuters.com:*:nL5N22S6L6

A Saudi-led military coalition in Yemen carried out severalair strikes on the Houthi-held capital Sanaa on Thursday. urn:newsml:reuters.com:*:nL5N22S0X4

"When tensions are this high, with the U.S. deploying asizeable military force, even a mistake or a tactical error byIran could ignite the Middle East powder keg," Stephen Innes,head of trading and market strategy at SPI Asset Management,told Reuters by email.

"There are lots of supply risks with tensions this high."

Besides the drop in Iranian exports, Russian shipments havebeen disrupted and the North Sea - home to the crudeunderpinning Brent futures - is also in tighter supply owing tooilfield maintenance and outages. urn:newsml:reuters.com:*:nL5N22S6QP

The market is also awaiting a decision from the Organizationof the Petroleum Exporting Countries (OPEC) and other producersover whether to continue with supply cuts that have boostedprices more than 30% so far this year.

A meeting of an OPEC-led ministerial committee in SaudiArabia this weekend will assess member states' commitment totheir deal to reduce oil production and could make arecommendation on whether to extend or adjust the pact. urn:newsml:reuters.com:*:nL5N22S456

The mounting Middle East tensions overshadowed bearishdevelopments for oil prices this week, such as an unexpectedincrease in U.S. crude inventories and consistently record-highproduction levels. Weekly U.S. rig count data, an indicator offuture production, will be released around 1 p.m. EDT.

Oil prices were also pressured by fears over global economicgrowth amid a standoff in Sino-U.S. trade talks.

Chinese media took a hardline approach to the tariff disputebetween the Washington and Beijing, saying the trade war willonly make China stronger and will never bring the country to itsknees. urn:newsml:reuters.com:*:nL4N22T0MJ

OPEC Oil Production Capacity png   https://tmsnrt.rs/2WJleV2
TECHNICALS-Brent oil may end bounce around $73.51-$73.80 range
TECHNICALS-U.S. oil may rise further into $63.96-$64.90 range
(Additional reporting by Alex Lawler, Aaron Sheldrick and ColinPackham; Editing by Marguerita Choy and David Goodman) ((devika.kumar@thomsonreuters.com; +1 646 223 6059; ReutersMessaging: devika.kumar.thomsonreuters.com@reuters.net))

This article appears in: Stocks , World Markets , Oil

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