Oil prices extend gains amid Middle East tensions, rate cut hopes

TOKYO, June 21 (Reuters) - Oil prices rose on Friday, with
Brent crude heading for its first weekly gain in five weeks on
tensions in the Middle East after Iran shot down a U.S. military
drone and on hopes for a drop in U.S. interest rates that may
stimulate global growth.
While U.S. President Donald Trump played down the
destruction of the drone, tensions remain high after the latest
incident in the Gulf, which followed tanker attacks last week
that raised concerns about crucial oil supplies being disrupted.
The demand-side picture has also improved, with expectations
that the U.S. Federal Reserve will cut interest rates at its
next meeting and with plans by Beijing and Washington to resume
talks to resolve a trade war that has hit economic growth
prospects.
Brent crude LCOc1 was up 39 cents, or 0.6%, at $64.84 a
barrel by 0034 GMT. The global benchmark rose 4.3% on Thursday
and is heading for a weekly gain of more than 4% after four
weeks of decline.
U.S. West Texas Intermediate crude CLc1 was up 32 cents,
or 0.6%, at $57.39 a barrel. The U.S. benchmark rose 5.4% on
Thursday and is on track for a nearly 10% increase this week.
Potential supply "disruptions have boosted energy prices
combined with the dollar weakness after the Fed signalled an
interest rate is near," Alfonso Esparza, senior market analyst
at OANDA, said in a note.
A weaker greenback tends to support oil prices because crude
is usually priced in dollars.
"Trade anxiety has died down, pushing energy prices higher
as global growth will not be pressured by a prolonged tariff
war," Esparza said.
Concern about slowing economic growth and a U.S.-China trade
dispute had pulled oil lower in recent weeks. That came after
Brent reached a 2019-high above $75 in April.
Trump said on Thursday he suspected the drone was shot down
by mistake and that "it would have made a big difference" to him
if the remotely-controlled aircraft had been piloted.
While the comments appeared to suggest Trump was not eager
to escalate the latest in a series of incidents with Iran, he
also warned that: "This country will not stand for it".
Tehran said the unarmed Global Hawk surveillance drone was
on a spy mission over its territory, but Washington said it was
shot down over international airspace.
Several top U.S. House Republicans said on Thursday the
United States must undertake a "measured response" to Iran.
Tension has been rising in the Middle East, home to over 20%
of the world's oil output, after attacks on two tankers near the
Strait of Hormuz, a chokepoint for oil supplies.
Washington blamed Tehran for the tanker attacks. Iran denied
any role.
A drop in U.S. crude inventories has also supported prices.
EIA/S