Oil prices rose on Friday and were on track for a weekly increase as geopolitical tensions over Iran remained unresolved, although flagging prospects for global economic growth amid the US-China trade war capped gains.
Brent crude futures were up 16 cents at $63.55 per barrel at 0834 GMT, equivalent to a weekly rise of around 1.7 per cent. They fell 6 per cent last week.
US West Texas Intermediate crude was 21 cents higher at $56.23 a barrel, a weekly gain of 1 per cent. It fell 7.5 per cent last week.
Tensions remained high around the Strait of Hormuz, the world's single most important oil passageway, as Iran refused to release a British-flagged tanker it seized last week in the Gulf.
US Secretary of State Mike Pompeo said Washington had asked Japan, France, Germany, South Korea, Australia and other nations to join a maritime security initiative in West Asia so oil and other products can flow through the Strait of Hormuz.
“The inability for prices to stage a material and sustained rally despite escalating disruption risk suggests that the current spot market is sufficiently supplied,” RBC analyst Al Stanton said.
Prices were also supported by a large crude inventory draw in the US, but gains were limited as the fall appeared to have been largely anticipated as US production in the Gulf of Mexico was still feeling the effects of Hurricane Barry.
“The crude draw, therefore, made little impact on crude prices while several indicators pointing to a slowdown of global oil demand growth appear to have taken over market sentiment,” said Jefferies analyst Jason Gammel.
Increasing pessimism about global growth was reflected in Reuters' polls taken July 1-24, which showed the growth outlook for nearly 90 per cent of the more than 45 economies polled was either downgraded or left unchanged. That applied not just to this year but also 2020.
“Growing challenges in the macroeconomic environment have kept bullish bets in check as risk appetites remain soft over potential weakness in global fuel demand,” said Benjamin Lu, commodities analyst at Singapore-based brokerage Phillip Futures.
The slowdown in global manufacturing and trade, and the associated hit to oil consumption, largely stems from a US-China trade war that has rumbled on over the last year.
Trade talks between the two countries broke down in May after getting close to a potential agreement. Next week, top US and Chinese negotiators will be meeting for the first time since then. Any positive outcome from the meeting is expected to boost oil prices.