Oil lifted to $73 by real and threatened supply cuts
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[May 17, 2019]
By Alex Lawler
LONDON (Reuters) - Oil edged higher to $73
a barrel on Friday, supported by a host of supply cuts and concern of
further disruption to Middle East shipments as tensions rise, and was
heading for a weekly gain.
U.S. sanctions on Iran have cut the OPEC member's crude exports further
in May, adding to supply curbs resulting from an OPEC-led pact.
Meanwhile, rising tension in the Middle East this week has raised
concern about additional supply disruption.
Brent crude was up 43 cents to $73.05 a barrel at 1101 GMT. The global
benchmark is up about 3 percent this week, having ended last week steady
and fallen the week before. U.S. West Texas Intermediate crude added 60
cents to $63.47.
"The Middle East is acting as a tinderbox for conflict," said Stephen
Brennock of oil broker PVM. "So long as this remains the case, the
energy complex will continue to be supported by bullish supply-side
signals."
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The mounting tension overshadowed bearish developments for oil prices
this week, such as an unexpected increase in U.S. crude inventories.
A Saudi-led military coalition in Yemen carried out several air strikes
on the Houthi-held capital Sanaa on Thursday after the Iranian-aligned
movement claimed responsibility for drone attacks on two Saudi oil
pumping stations.
Earlier this week, staff were evacuated from the U.S. embassy in
Baghdad, while U.S. President Donald Trump ordered the deployment of an
aircraft carrier group, B-52 bombers and Patriot missiles to the Middle
East.
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![](../images/051719pics/busine47.jpg)
A view shows a well head
and a drilling rig in the Yarakta Oil Field, owned by Irkutsk Oil
Company (INK), in Irkutsk Region, Russia March 11, 2019. REUTERS/Vasily
Fedosenko/File Photo
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"When tensions are this high, with the U.S. deploying a sizable military force,
even a mistake or a tactical error by Iran could ignite the Middle East powder
keg," Stephen Innes, head of trading and market strategy at SPI Asset
Management, told Reuters by email.
"There are lots of supply risks with tensions this high."
Besides the drop in Iranian exports, Russian shipments have been disrupted and
the North Sea - home to the crude underpinning Brent futures - is seeing tighter
supply due to oilfield maintenance and outages.
The market is also awaiting a decision from the Organization of the Petroleum
Exporting Countries (OPEC) and other producers over whether to continue with
supply cuts that have boosted prices more than 30% so far this year.
A meeting of an OPEC-led ministerial committee in Saudi Arabia this weekend will
assess member states' commitment to their deal reducing oil production and may
make a recommendation on whether to extend or adjust the pact.
(Additional reporting by Aaron Sheldrick and Colin Packham; Editing by Alexander
Smith and Mark Potter)
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