Oil gains as US inventories slip and Middle East tensions ease

The Swiss lender has revised its 12-month forecast to $60 per barrel on the basis of continued low demand growth. EPA

Oil gained moderately following a decline on Tuesday after US crude inventory levels slipped following Hurricane Barry and tensions between the US and Iran eased.

Brent was trading at $65.17 per barrel at 4.12pm UAE time as inventory data from the American Petroleum Institute showed a decline of 1.4 million barrels in the week ending July 12. The hurricane, which struck the coast of Louisiana, took offline more than half of daily crude production from the Gulf of Mexico.

Prices also lost steam following US President Donald Trump’s statement that his administration was not after regime change in Iran, signalling talks could take place with Tehran. The two sides have been in a tense stand-off ever since a spate of tanker attacks off the coast of Fujairah and in the Gulf of Oman in May and June. The US pointed the finger at Tehran, which denied the allegations. Mr Trump then initially ordered strikes against Iran after the downing of a US drone that Iran claimed was operating over its airspace, but he called them off fearing heavy civilian casualties.

Tensions in the region have not completely fizzled out with Iran standing accused of seizing a Panamanian-flagged UAE tanker, which disappeared off the Strait of Hormuz.

Tehran said the tanker had been towed to Iranian territorial waters for repairs.

Passage along the strait, through which a third of the world’s seaborne crude transits, remains fraught with difficulty not only due to the geopolitical situation but also rising shipping costs following recent incidents, pushing up insurance premiums.

US inventories aside, Opec, which is spearheading an alliance with non-member sovereign producers to restrict supply, saw aggregate production fall to 29.9 million barrels per day, the lowest level seen since 2014 as Saudi Arabia, the UAE and Kuwait continue to cut back above their quotas.