Oil rose more than $1 on Thursday amid Middle East tensions and a big fall in U.S. crude stocks, but prices faced downward pressure from weak manufacturing data in Western nations indicating slowing economic growth that could reduce fuel demand.
Brent crude futures were up 68 cents at $63.86 a barrel by 1325 GMT, after hitting a session high of $64.23.
U.S. West Texas Intermediate crude was up 68 cents at $56.56 a barrel, after hitting a session high of $56.99.
A week after Iran seized a British-flagged tanker in the Gulf, Britain’s Ministry of Defence said the Royal Navy had been tasked with accompanying UK-flagged ships through the Strait of Hormuz to defend freedom of navigation.
Saudi Arabia, the world’s top oil exporter, also urged global oil buyers to secure energy shipments passing along the Strait of Hormuz, through which about 20% of global supply is transported daily.
Prices were also supported by a fall in U.S. crude stocks by nearly 11 million barrels, well above analysts’ expectations for a drop of 4 million barrels.
“While that draw was influenced by temporary factors – Hurricane Barry – U.S. crude inventories have plunged by 40 million barrels over the last six weeks, suggesting the oil market is finally rebalancing,” UBS analyst Giovanni Staunovo said.
In a sign of the supply-demand balance, Brent briefly dipped into contango on Wednesday for the first time since March. Contango is a market structure in which prices for forward deliveries are higher than for prompt ones.
Oil prices have been under pressure from concerns about global economic growth amid growing signs of harm from the U.S.-China trade war that has rumbled on over the last year.
But the White House eased some concerns, saying top U.S. and Chinese negotiators would meet next week to continue talks, and global equities edged up on the news.
“Despite the bullish supply-side fundamentals and geopolitics that support oil prices, it seems that the market needs a positive economic catalyst to move appreciably higher,” said Harry Tchilinguirian, global oil strategist at BNP.
“If we get positive echoes next week from renewed U.S.-China trade talks, then oil can advance noticeably higher.”
A series of purchasing manager index (PMI) readings in the United States and Europe were weaker than expected.
The German PMI, tracking the manufacturing and services sectors, hit a seven-year low in July, suggesting a deteriorating growth outlook for Europe’s largest economy. The fall was driven by the auto sector.