U.S. West Texas Intermediate crude oil is poised to post a weekly gain with several factors contributing to this week’s steep rise in crude oil prices. The buying started early in the week on the hope that a meeting between U.S. President Trump and China President Xi Jinping would lead to an eventual trade deal between the two economic powerhouses. It continued early Wednesday following the release of a better-than-expected government inventories report.
A weaker U.S. Dollar is also helping to boost foreign demand for dollar-denominated crude oil. The greenback weakened when the Federal Reserve hinted at a July rate cut. Buyers are also reacting to reports that OPEC and its allies will extend the deal to cut production, trim the excess supply and stabilize prices.
Middle East Tensions Rising
The biggest story of the week is the escalation of tensions in the Middle East after a U.S. official said one of the country’s military drones was shot down by an Iranian missile. The drone was downed in international airspace over the Strait of Hormuz by an Iranian surface-to-air missile, a U.S. official said on Thursday, speaking on condition of anonymity.
The New York Times reported late Thursday that President Donald Trump approved military strikes on several Iranian targets, but surprisingly pulled back the order to launch the attacks. According to a senior White House official, the strikes were planned against a “handful” of targets.