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Brent crude futures were at $64.86 a barrel, and the US crude futures settled at %57.90 a barrel. Brent climbed 5 per cent, and crude increased 10 per cent as tensions increased between the US and Iran as Iran shot down a US drone.
Washington blamed Iran for the attack, but Iran denied any role. Trump called off a retaliatory attack last week on the nation at the last minute, preventing exponential gains in oil.
The markets have reemerged from the risks and are now waiting for positive information about the US-Sino trade talks during the G20 meeting. One of the key factors strongly impacting crude is the decline in demand.
Slowing economic growth and weak manufacturing data by the Federal Reserve Bank of Dallas created further worries related to it. Supply in the sector is expected to remain tight as the OPEC + alliance has extended the deal to curb production to restore price.
The meeting of the countries is proposed to be held in Vienna on July 1 – 2 to discuss strategies for production and global supply/demand ratio control.
The price was down almost 20 per cent since the April 2019 hike, mainly due to US-China trade issues and poor economic data where the global demand was low.
China’s industrial output slowed this year to almost 17 years low – as per the National Bureau of Statistics, and all the major agencies reported weaker demand, which resulted in a decline in rates.
Saudi Arabia said the countries involved in production must keep shipping lanes open for others to ensure stable supplies.
In the last year, the OPEC+ nations had agreed to cut production by 1.2 million BPD from the start of 2019 to control rates.
The US president said a military strike would have responded to the strike on unmanned US surveillance, but it would have caused a disproportionate loss of life.
Tehran received the message that Trump may initiate an attack, but it has been aborted since it can lead to international and regional consequences.
In the last few months, crude demand improved with investors interested in buying high-risk assets as the US central banks and the European banks announced the rate cuts.
A weaker dollar against major currencies also created a support line, and other macroeconomic factors supported the rates.
Despite attacks, trade wars, and other political and economic issues, oil prices have not surged in the last few years. The production of US shale increased, and there were a lot of supplies in the market.
Hedge funds were a net seller of almost 3 million barrels in 6 important crude futures in the last weeks, and some money managers continued to increase shorts and reduce longs. Still, the war tensions helped halter the sell-off, increasing the long positions.
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