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Oil trades near US$60 on storm disruption as glut concerns linger
[LONDON] Oil traded near US$60 a barrel after a storm shut almost three-quarters of US Gulf of Mexico crude production, even as lingering demand concerns continue to dent the outlook.
Futures rose 0.4 per cent in New York. About 73 per cent of crude output in the Gulf of Mexico was halted as of Sunday but some producers are preparing to return workers to offshore platforms as storm Barry weakens after making landfall. The shutdown countered the impact of China's economy slowing to a three-decade low in the second quarter amid a prolonged trade dispute with the US.
Crude has gained this month because of shrinking US stockpiles and rising tensions in the Middle East. The UK and its allies are considering beefing up their military presence in the Persian Gulf to deal with the threat to shipping posed by Iran. Still, there are concerns over the longer term outlook for the oil market with Opec warning of a glut in 2020 while the IEA pointed to a surprise increase in global inventories in the first half of this year.
"The basic message is that the second half of this year will see some depletion in global oil inventories but this will be followed by a dismal 2020," PVM Oil Associates analyst Tamas Varga wrote in a report.
West Texas Intermediate for August delivery added 22 US cents to US$60.43 a barrel on the New York Mercantile Exchange as of 8.43am New York time. Brent for September settlement was 33 US cents higher at US$67.05 a barrel on the ICE Futures Europe Exchange and traded at a premium of US$6.52 to WTI for the same month.
Exxon Mobil and Chevron are among companies returning workers to their offshore platforms and restarting output in the Gulf of Mexico following storm Barry. The region accounts for 16 per cent of total American crude oil production and under 3 per cent of natural gas production, according to the Department of Energy.
The International Energy Agency said Friday that production cuts by Opec and its allies failed to prevent the return of a surplus in the first half of 2019 as supply exceeded demand at a rate of 900,000 barrels a day. China's gross domestic product rose 6.2 per cent in the second quarter from a year earlier, below the 6.4 per cent expansion in the first quarter.