Oil Prices Jump Nearly 3% After Official Says US Drone Was Shot Down
Also supporting oil were expectations that the U.S. Federal Reserve could cut interest rates at its next meeting, stimulating growth in the world’s largest oil-consuming country, and a drop in U.S. crude inventories.
Brent
crude, the global benchmark, was up $1.65 at $63.48 a barrel at 8:37 a.m. ET,
having risen 3.3% to $63.88 earlier in the session.
U.S.
West Texas Intermediate crude rose $1.74 to $55.50.
“It’s
a combination of factors,” Petromatrix analyst Olivier Jakob said of the price
rise. “You have more supportive stocks data, the Fed indicating they will cut
rates and the shooting down of the drone.”
The
drone was downed in international airspace over the Strait of Hormuz by an
Iranian surface-to-air missile, a U.S. official said. Iran’s Revolutionary
Guards said the drone was flying over southern Iran.
Tension
has been rising in the Middle East, home to over 20% of the world’s oil output,
after attacks on two tankers near the Strait of Hormuz, a chokepoint for oil
supplies. Washington blamed Tehran for the tanker attacks. Iran denied any
role.
Concern
about slowing economic growth and a U.S.-China trade dispute has pulled oil
lower in recent weeks. Brent reached a 2019 high of $75 in April.
Also
propelling oil higher on Thursday was a larger-than-expected decline in U.S.
crude inventories and the prospect of prolonged supply restraint by producer
group OPEC and its allies.
After
swelling to near two-year highs, U.S. crude stocks fell by 3.1 million barrels
last week, compared with analyst expectations for a draw of 1.1 million
barrels, the Energy Information Administration said on Wednesday.
The
Organization of the Petroleum Exporting Countries and allies including Russia
agreed this week to meet on July 1-2, ending a month of wrangling about the
timing of the meeting.
The
coalition known as OPEC+ will discuss whether to extend throughout 2019 a deal
on cutting 1.2 million barrels per day of production. The deal expires at the
end of this month.
Momentum for an agreement appeared to be building as the United Arab Emirates’ energy minister said extending the deal was “logical and reasonable”.