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Oil slips but set for weekly gain on Mideast supply disruption fears


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UPDATE 7-Oil slips but set for weekly gain on Mideast supply disruption fears


* Lower Iran exports, North Sea and OPEC cuts support prices

* Trade tensions keep Wall Street, oil under pressure

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

* U.S. oil drillers cut rigs to lowest count since March2018 (Adds Baker Hughes data, equities market)

By Devika Krishna Kumar

NEW YORK, May 17 (Reuters) - Oil prices edged lower onFriday, but both benchmarks were on track for a weekly gain onrising concerns over potential further supply disruptions inMiddle East 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 down 44 cents, or 0.6%, at $72.18 abarrel by 1:40 p.m. EDT (1740 GMT). The global benchmark was setto rise about 2% this week, having ended last week largelysteady and fallen the week before.

U.S. West Texas Intermediate crude CLc1 fell 7 cents to$62.80, and was on track for a weekly gain of about 1.8%.

Oil prices came under pressure on Friday from seesawing U.S.equity markets .DJI due to fears over global economic growthamid a standoff in Sino-U.S. trade talks. urn:newsml:reuters.com:*:nL4N22T3KH.N

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:*:nL4N22T0MJurn:newsml:reuters.com:*:nL2N22T0P4

"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.

However, U.S. energy firms this week reduced the number ofoil rigs operating for the second week in a row, with the rigcount at its lowest since March 2018, as some drillers followthrough on plans to cut spending. urn:newsml:reuters.com:*:nL2N22T0W0

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OPEC Oil Production Capacity png   https://tmsnrt.rs/2WJleV2
TECHNICALS-Brent oil may end bounce around $73.51-$73.80 range
 ID:nL4N22T09K
TECHNICALS-U.S. oil may rise further into $63.96-$64.90 range
 ID:nL4N22T0PZ
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(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))






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