U.S. West Texas Intermediate crude oil futures are edging higher for the week, while posting a relatively tight trading range following the previous week’s steep sell-off. The inside trading range suggests investor indecision and impending volatility. The rangebound trade is being capped by worries over global demand and underpinned by tensions in the Middle East.
Actually there is more to the limited gains than the forecasts for lower demand. There are also worries about rising U.S. shale production. However, this week’s U.S. government inventories report was bullish. Furthermore, the market is also being supported by the OPEC-led supply cuts and U.S. sanctions against Venezuela and Iran. Although these factors may eventually be offset by climbing U.S. production.
Middle East Tensions
According to the latest reports, tensions remain high around the Strait of Hormuz because Iran is refusing to release the British flagged oil tanker it commandeered last week in the Gulf.
In the meantime, U.S. Secretary of State Mike Pompeo said Washington had asked Japan, France, Germany, South Korea, Australia and other nations to join maritime security efforts.
Weakening Global Economy
Recently, OPEC and the International Energy Agency warned of lower future demand. On Friday, a Reuters poll taken July 1-24 showed the growth outlook for nearly 90% of the more than 45 economies surveyed was downgraded or left unchanged. That applied not just…