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Oil prices rise after Iran says it seized foreign tanker in Gulf

File photo. Photograph:( Reuters )

Reuters London Jul 18, 2019, 05.41 PM (IST)

Oil prices rose about 1% on Thursday after Iran said it had seized a foreign oil tanker in the Gulf amid rising tensions between Tehran and the West over the safety of shipping in the Strait of Hormuz, a vital gateway for energy exports.

Brent crude futures were up 48 cents at $64.14 a barrel by 1148 GMT after hitting a session high of $64.46.

West Texas Intermediate crude futures were up 33 cents at $57.11 after the U.S. benchmark hit a session high of $57.32.

Iran said the vessel, which it did not identify, was smuggling fuel and had been carrying 1 million litres, or around 6,200 barrels.

"The oil price reaction on Thursday shows once again that the conflict in the Middle East is far from solved and tensions could flare up at any time again. As oil keeps flowing, prices are likely to rise only temporarily," said Giovanni Staunovo, an analyst at Union Bank of Switzerland (UBS).

Iran said the vessel impounded was the same one it towed on Sunday after the ship had sent a distress call. US officials said on Wednesday they were unsure whether an oil tanker towed into Iranian waters had been seized or rescued.

Britain urged Iran to ease tensions in the Gulf while pledging to defend its shipping interests in the region.

Oil had fallen on Wednesday in response to a sharp rise in US stockpiles of products such as gasoline that pointed to weak demand during the US driving season.

WATCH: Iran says UK's seizure of oil tanker will not go unanswered

Data from the US Energy Information Administration (EIA) showed a larger-than-expected drawdown in crude stockpiles last week, but traders focused instead on large builds in refined product inventories.

US crude inventories fell by 3.1 million barrels, the EIA said, more than analysts' forecasts for a decrease of 2.7 million barrels.

But gasoline stocks rose by 3.6 million barrels, compared with analysts' expectations in a Reuters poll for a 925,000-barrel drop. Distillate stockpiles grew by 5.7 million barrels, much more than expectations for a 613,000-barrel increase, the EIA data showed.

The gasoline inventory build in the United States was "especially remarkable in the week after the Independence Day weekend given that this is normally one of the periods of highest demand", analysts at Commerzbank wrote.

The summer driving season normally entails increased consumption of gasoline.

US President Donald Trump’s threat to impose additional tariffs on China has also pressured oil prices, with nerves on edge over when talks between the two countries will resume resolving a trade war that has slowed global economic growth.

Barclays on Thursday lowered its oil price forecasts for the second half of this year and 2020, saying it expected slower demand growth due to a weaker-than-expected global economic backdrop.

Story highlights

Oil prices rose about 1% on Thursday after Iran said it had seized a foreign oil tanker in the Gulf amid rising tensions between Tehran and the West over the safety of shipping in the Strait of Hormuz, a vital gateway for energy exports