(Bloomberg) -- Oil headed for its biggest weekly gain in three weeks as simmering Middle East tensions, shrinking U.S. crude inventories and a storm in the Gulf of Mexico all conspired to threaten the supply outlook.
Futures rose 0.7% in New York Friday and are up more than 5% for the week. Tropical Storm Barry, which could hit the Louisiana coast on Saturday, has already curbed about half of the energy output in the Gulf. Iran’s attempt to block the passage of a British tanker in the Persian Gulf has ratcheted up tension in the oil-rich region, while American crude stockpiles have fallen to the lowest level in almost three months.
While there are risks to supply in the short term, further out the picture doesn’t look promising. The Organization of Petroleum Exporting Countries warned Thursday of a glut in 2020 as U.S. shale production surges. The demand outlook is also shaky. Although the world’s two largest economies have called a trade war truce and resumed talks, President Donald Trump complained China hasn’t met a pledge to buy more American farm goods.
West Texas Intermediate crude for August delivery gained 40 cents, or 0.7%, to $60.60 a barrel on the New York Mercantile Exchange as of 9 a.m. in Singapore. The contract closed down 0.4% Thursday and is up 5.4% for the week.
Brent for September settlement rose 40 cents, or 0.6%, to $66.92 a barrel on the ICE Futures Europe Exchange. Prices are up 4.2% this week. The global benchmark crude traded at a $6.25 premium to WTI for the same month.
--With assistance from James Thornhill.
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