Oil jumps 3% to $63 as Iran shoots down U.S. drone in Gulf
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[June 20, 2019] By
Alex Lawler
LONDON (Reuters) - Oil rose by more than 3%
to above $63 a barrel on Thursday after Iran shot down a U.S. military
drone, raising fears of a military confrontation between Tehran and
Washington.
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, also
provided support to prices.
Brent crude, the global benchmark, was up $1.40 at $63.22 a barrel at
1035 GMT, having earlier risen 3.3% to $63.88. U.S. West Texas
Intermediate crude rose $1.54 to $55.30.
"The risk of a military conflict in the Middle East has risen because of
a ratcheting up of tensions between the United States and Iran," said
Abhishek Kumar of Interfax Energy in London.
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"Elsewhere, the U.S. Federal Reserve has signaled its willingness to
loosen monetary policy over the coming months, which is being perceived
as favorable to oil demand."
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.
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![](../images/062019pics/busine27.jpg)
Oil tankers pass through the Strait of Hormuz, December 21, 2018.
REUTERS/Hamad I Mohammed
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The prospect of further rate cuts could prove the more significant
factor for oil, said Petromatrix analyst Olivier Jakob, should Iran-U.S.
tension not escalate.
"The Fed and the cutting of rates is something that will provide more
substantial support," he said.
Also propelling oil higher on Thursday was a decline in U.S. crude inventories
and the prospect of prolonged supply restraint by producer group OPEC and its
allies.
U.S. crude stocks fell by 3.1 million barrels last week, more than analysts
expected, the Energy Information Administration said on Wednesday. [EIA/S]
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.
The coalition known as OPEC+ looks set to extend a deal on cutting 1.2 million
barrels per day of production. The deal expires at the end of June.
(Additional reporting by Aaron Sheldrick; Editing by Dale Hudson and Alexander
Smith)
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