Oil heads higher for the session, but looks to end the week with a more than 7% loss

Oil futures traded higher Friday, a day after the U.S. said it shot down an Iranian drone in the Strait of Hormuz, stoking worries that rising tensions between Washington and Tehran could disrupt the global flow of crude.

But concerns over rising global supplies and demand prospects kept prices on track for a steep weekly decline.

West Texas Intermediate crude for August delivery CLQ19, +0.31% rose 44 cents, or 0.8%, to $55.74 a barrel on the New York Mercantile Exchange. Prices for the most-active August contract, which expires at Monday’s settlement, traded 7.4% lower for the week. That would be the largest weekly percentage loss since the week ended May 31, FactSet data show.

Brent crude BRNU19, +0.71% for September delivery, the global benchmark, was up 37 cents, or 0.6%, at $62.30 a barrel on ICE Europe, poised for a weekly decline of 6.6%.

“In contrast to yesterday’s massive losses, the gains were only moderate, however. It appears that there are growing concerns on the oil market about a renewed oversupply,” said Carsten Fritsch, commodity analyst at Commerzbank, in a note.

Iran denied that one of its drones had been destroyed, hours after President Donald Trump said the USS Boxer, an amphibious assault ship, had destroyed a drone that had flown too close. It was the latest in a series of incidents and confrontations near the Strait of Hormuz, a narrow waterway through which around a third of global seaborne crude oil must pass. Trump last month said he called off a retaliatory strike at the last minute after Iran shot down a U.S. military drone near the strait.

Oil was pressured earlier in the week in part due to signs the U.S. and Iran were moving closer to negotiations over Tehran’s missile program. Data showing smaller-than-expected weekly fall in U.S. crude supplies and sizable gain in petroleum product stocks, and the recovery in Gulf of Mexico oil production in the wake of Hurricane Barry also combined to push prices lower.

Meanwhile, International Energy Agency Executive Director Fatih Birol on Thursday told Reuters the agency was cutting its 2019 forecast for global oil-demand growth to 1.1 million barrels a day versus its June forecast of 1.2 million barrels a day.

“We do believe that oil market fundamentals are at an inflection point,” said Jason Gammel, energy analyst at Jefferies, in a note. “Non-OPEC supply will grow by over 2 million barrels a day in 2020, while demand growth is weak.”

The decision earlier this summer by the Organization of the Petroleum Exporting Countries and its allies to extend production cuts should be enough to draw down inventories in major oil-using economies through the end of the year, but will need to be extended through 2020 just to keep the oil market near balance, he said.

In other energy trade, August gasoline RBQ19, +0.27% rose 0.6 cent, or 0.3%, to $1.8399 a gallon, with prices down about 6.9% for the week, while August heating oil HOQ19, +0.98% was up 1.9 cents, or 1%, to $1.8821 a gallon, trading 4.9% lower for the week.

August natural gas NGQ19, -1.49% was down 2.5 cents, or 1.1%, at $2.62 per million British thermal units, on track for a weekly loss of around 7.8%.

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