(Bloomberg) -- Oil declined as concerns that slowing economic growth will stymie energy demand outweighed worries that a confrontation with Iran may threaten supplies.
Futures lost as much as 1.5% in New York as anxieties over demand resurfaced this week following a slew of sluggish economic indicators from the U.S., China and Europe, even as the Organization of Petroleum Exporting Countries and its allies agreed to extend output cuts. On Thursday, British special forces seized a supertanker off Gibraltar carrying Iranian oil to Syria, triggering a diplomatic row, but the tensions weren't enough to lift prices.
Oil is down for the week after plunging 4.8% on Tuesday, its worst decline right after an OPEC meeting in more than four years. While the group's Secretary-General Mohammad Barkindo described the drop as an “anomaly,” Bank of England Governor Mark Carney warned of dangers from rising protectionism around the world and said there could be a “widespread slowdown” that may require a major economic-policy response.
“You have these very real concerns that demand growth is weakening,” Daniel Ghali, a TD Securities commodities strategist, said by phone from Toronto. “We do think there is still a significant amount of upside risk in prices considering that Iran-U.S. tensions are at a boil.”
West Texas Intermediate oil for August delivery declined 37 cents, or 0.7%, to $56.97 a barrel on the New York Mercantile Exchange as of 11:37 a.m. The contract gained $1.09 on Wednesday, recovering some ground after slumping the most since May 31 in the previous session. Because of the Independence Day holiday in the U.S. on Thursday, settlement of the day's trades will only happen on Friday.
Brent for September slipped 29 cents to $63.53 a barrel on the ICE Futures Europe Exchange, after adding 2.3% on Wednesday. The benchmark global crude traded at a premium of $6.48 to WTI for the same month.
Oil Bulls Lose Support of the Tightest Physical Market in Years
U.S. crude inventories shrank by 1.09 million barrels last week, according to the Energy Information Administration. A Bloomberg survey of analysts had predicted a loss of 3 million barrels. Gasoline stockpiles fell by 1.58 million barrels, compared with a forecast for a 2.4 million-barrel loss. U.S. oil production remains near a record.
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--With assistance from Alex Longley.
To contact the reporter on this story: Robert Tuttle in Calgary at rtuttle@bloomberg.net
To contact the editors responsible for this story: Serene Cheong at scheong20@bloomberg.net, Carlos Caminada
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