Oil edges towards $73 supported by supply cuts
London — Oil edged higher towards $73 a barrel on Friday, supported by real and threatened supply disruptions in the Middle East and heading for a weekly gain.
US sanctions on Iran cut oil cartel Opec member’s crude exports further in May, adding to supply curbs resulting from an Opec-led pact. Meanwhile, rising tensions in the Middle East this week have raised concern about additional supply disruption.
Brent crude rose 15c to $72.77 a barrel at 9.08am GMT. The global benchmark is up almost 3% this week, having ended last week steady and fallen the week before. US West Texas Intermediate (WTI) crude added 24c to $63.11.
“The Middle East is acting as a tinderbox for conflict,” said Stephen Brennock of oil broker PVM. “So long as this remains the case, the energy complex will continue to be supported by bullish supply-side signals.”
The mounting tension overshadowed bearish developments for oil prices this week, such as an unexpected increase in US crude inventories.
A Saudi-led military coalition in Yemen carried out several air strikes on the Houthi-held capital Sanaa on Thursday after the Iranian-aligned movement claimed responsibility for drone attacks on two Saudi oil pumping stations.
Earlier this week, staff were evacuated from the US embassy in Baghdad, while US President Donald Trump ordered the deployment of an aircraft carrier group, B-52 bombers and Patriot missiles to the Middle East.
“When tensions are this high, with the US deploying a sizable military force, even a mistake or a tactical error by Iran could ignite the Middle East powder keg,” Stephen Innes, head of trading and market strategy at SPI Asset Management told Reuters by e-mail. “There are lots of supply risks with tensions this high.”
The market is also awaiting a decision from Opec and other producers over whether to continue with supply cuts that have boosted prices more than 30% so far this year.
A meeting of an Opec-led ministerial committee in Saudi Arabia this weekend will assess member states’ commitment to their deal reducing oil production and may make a recommendation on whether to extend or adjust the pact.