Oil prices nudged up early on Friday, supported by weekly U.S. reports of inventory draws and simmering tensions in the Middle East, while worsening outlooks on the global economy capped price gains.
The Iran-West tensions in the Middle East and a call from none other than the world’s top crude oil exporter, Saudi Arabia, on countries buying oil to secure the free navigation of tankers in the Strait of Hormuz lent support to prices. The bullish factors this week also included the EIA reporting a stunning inventory draw of 10.8 million barrels in U.S. crude oil inventories in the week to July 19, confirming the estimate of the American Petroleum Institute (API) which had reported a day earlier a draw of over 10 million barrels, continuing a string of weekly declines.
According to estimates from ING, U.S. crude oil inventories have declined by around 40 million barrels over the past one and half months. The current inventory surplus over the five-year average has narrowed down from 38 million barrels in June 2019 to 15 million barrels currently, ING says.
Despite the huge U.S. inventory draws and the continued unresolved tensions in the Middle East, oil price gains were constrained by continued concern over the health of the global economy going forward.
According to Reuters polls of more than 500 economists carried out between July 1 and 24, experts worry that the U.S.-China trade war will impact global economic growth more than previously expected, despite clear signals from many major central banks, including the Fed, that they would cut rates and ease monetary policies. More than 70 percent of 250 economists polled by Reuters now say a deeper global economic downturn is more likely, compared to around 50 percent in a similar poll in April.
By Tsvetana Paraskova for Oilprice.com
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