Oil slips towards $65

Updated 11 Jan 2020

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Brent crude is heading for its first weekly decline in six weeks. — AFP/File
Brent crude is heading for its first weekly decline in six weeks. — AFP/File

LONDON: Oil slipped further towards $65 a barrel on Friday as tensions in the Middle East over Iran eased for now and investors focused on rising US inventories and other signs of ample supply.

Iran responded to a US drone strike that killed a top Iranian general on Jan 3 with a missile attack on Iraqi air bases hosting US forces that left no casualties. But a Revolutionary Guards commander said Iran would take "harsher revenge" soon.

“Hostilities may have ended for the time being, but the longer-term risks of conflict have by no means vanished,” said Stephen Brennock of oil broker PVM.

“Set against this backdrop, the threat of supply disruptions in the Middle East is very much alive.”

Brent crude, the global benchmark, was down 27 cents at $65.10 by 1415 GMT, and was heading for its first weekly decline in six weeks, down over 4pc. US West Texas Intermediate crude slipped 33 cents to $59.23.

Brent is now below where it was before the US drone strike that killed Iranian general on Jan 3.

“There has been some de-escalation, but the return of risk is still there,” said Olivier Jakob, oil analyst at Petromatrix.

“The closing hours of Friday are traditionally filled by short-covering due to the impossibility to react during the weekend.” Still, there has been no disruption to Middle East production as a result of the flare-up in tensions and other indications this week suggest supply is ample.

Crude inventories in the United States rose last week by 1.2 million barrels, the US Energy Information Administration said on Wednesday.

That compared with analysts’ expectations in a Reuters poll for a 3.6 million-barrel drop.

“There’s too much supply out there,” a Japan-based based oil executive told Reuters.

In a bid to tackle any build-up of excess supply, the Organization of the Petroleum Exporting Countries plus allies including Russia are embarking on a further cut in production as of Jan 1 this year.

Published in Dawn, January 11th, 2020