Oil Heads for Worst Week Since May on Oversupply Fears

Oil prices edged higher Friday but remained on track for their worst week since May, the latest turn lower for crude in 2019 as fears of excess supply buffet prices.

West Texas Intermediate futures, the U.S. crude benchmark, inched up 0.5% to $55.59 a barrel on the New York Mercantile Exchange and was on track to snap a four-session losing streak. Prices are down about 7.5% for the week.

Brent crude, the global price gauge, added 0.8% to $62.43 a barrel on London’s Intercontinental Exchange, trimming its weekly slide to roughly 6%.

Friday’s modest rebound came with the U.S. and Iran tussling over the fate of a drone, as many analysts remain wary that tensions between the two countries could further disrupt the flow of oil around the globe.

Iran denied that the U.S. Navy had downed one of its drones, hours after President Trump said an assault ship named the USS Boxer had taken defensive action because the drone was flying too close. That followed several close encounters between American warships and the Iranian military. Earlier, Iranian forces said they had seized a foreign tanker.

Still, elevated stockpiles around the world continue to signal to investors that there is plenty of oil available, curbing price gains. U.S. crude remains about 16% below its April peaks with the U.S. still churning out record amounts of crude and analysts wary that crumbling demand will lead to a production glut.

Analysts also said Tropical Storm Barry was less disruptive than anticipated to production and refining activity near the Gulf of Mexico recently, keeping some cautious that prices can sustain their Friday rally.

“Call it a bounce or a dead-cat bounce, after such a sharp drop, this upside is not very surprising and in the end it’s still a muted upward gain,” said Commerzbank analyst Carsten Fritsch.

Dangerous Passage

Recent incidents have raised fears over safety in the Strait of Hormuz.

Iran claims it

captured a tanker†

President Trump said the USS Boxer, pictured here in May 2019, destroyed an Iranian drone in the Strait of Hormuz.


Photo:

Petty Officer 2nd Class Jesse Mo/Associated Press

In the latest sign of softening projections for fuel consumption, International Energy Agency Director Fatih Birol on Thursday told Reuters that the agency was cutting its 2019 oil-demand growth forecast by 100,000 barrels.

Additionally, the recent news that Russia’s Druzhba pipeline—which was contaminated by organic chloride in April—has returned to full capacity removes another threat to global supply, said Geordie Wilkes, head of research at Sucden Financial Research.

Despite production cuts by the Organization of the Petroleum Exporting Countries and allies including Russia, some analysts expect crude prices to remain in their current trading range moving forward.

Elsewhere in commodities Friday, most-active Comex copper futures advanced 3% to $2.7910 a pound, paring some of their recent declines and hitting a roughly two-month high as analysts expect Chinese stimulus efforts to boost demand moving forward.

Gold added 0.6% to $1,436.60 a troy ounce, extending a recent rally to a six-year high as analysts continue to wager that lower bond yields will support bullion, which becomes more attractive to yield-seeking investors when interest rates fall.

Write to David Hodari at David.Hodari@dowjones.com and Amrith Ramkumar at amrith.ramkumar@wsj.com

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