UPDATE 9-Oil climbs on Iran tensions, U.S. inventory decline

* Saudi Arabia calls on buyers to secure oil shipments in
Hormuz
* Weekly U.S. crude inventories drop by nearly 11 mln
barrels
* Weak PMI readings raise concerns over global growth

(Adds comments, latest detail on tension with Iran, settlement
prices)
By Devika Krishna Kumar
NEW YORK, July 25 (Reuters) - Oil prices edged higher on
Thursday supported by rising tensions between the West and Iran
and a big decline in U.S. crude stockpiles, but gains were
capped due to lingering worries about slowing economic growth
that could reduce fuel demand.
Brent crude futures LCOc1 settled 21 cents, or 0.33%,
higher at $63.39 a barrel after hitting a session high of $64.23
U.S. West Texas Intermediate crude CLc1 ended the session
up 14 cents, or 0.25%, at $56.02 a barrel, after hitting a
session high of $56.99 earlier.
A week after Iran seized a British-flagged tanker in the
Gulf, Britain has started sending a warship to accompany all
British-flagged vessels through the Strait of Hormuz, a change
in policy announced on Thursday after the government previously
said it did not have resources to do so. The United States, Britain and other nations will meet in
Florida on Thursday to discuss how to protect shipping in the
Gulf from Iran.
Saudi Arabia, the world's top oil exporter, also urged
global oil buyers to secure energy shipments passing along the
Strait of Hormuz, through which about 20% of global supply is
transported daily. The kingdom also aims to raise the capacity of its east-west
pipeline by 40% in two years so more of its oil exports can
avoid passing through the Strait of Hormuz, the energy minister
said on Thursday. Prices were also supported by a fall in U.S. crude stocks by
nearly 11 million barrels, well above analysts' expectations for
a drop of 4 million barrels. EIA/S
"The strong draw of nearly 11 million barrels mostly came
from the Gulf of Mexico, which was dealing with the aftermath of
Tropical Storm Barry. U.S. production saw its biggest drop since
October 2017, but it is expected to rebound strongly next week,"
said Edward Moya, senior market analyst at OANDA in New York.
"Further global economic data weakness may have limited
effects on crude demand as the next round of easing from the
ECB, along with the Fed's shift to an easing cycle, will help to
bolster the economy."
Oil prices have been under pressure from concerns about
global economic growth amid growing signs of harm from the
U.S.-China trade war that has rumbled on over the last year.
U.S. stocks fell on Thursday after a handful of mixed
earnings reports pointed to a slowing global economy, and as the
European Central Bank chief's comments on monetary policy failed
to impress investors. However, hopes that the Federal Reserve would adopt a looser
monetary policy at its rate-setting meeting next week to counter
the impact of the U.S.-China trade war have helped Wall Street's
main indexes scale record levels this month.
In a sign of the growing supplies and weak demand signals,
Brent LCOc1-LCOc2 briefly dipped into contango on Wednesday
for the first time since March. Contango is a market structure
in which prices for forward deliveries are higher than for
prompt ones. negotiators for China and the United States will meet
in Shanghai on Tuesday for two days in the next round of trade
talks, China's commerce ministry confirmed. "The choppy price action that we had anticipated at the
beginning of this week is still being played out amidst an array
of cross-currents that are prompting a seesaw type environment
that is being heavily influenced by mixed interpretations to the
latest EIA guidance as well as algorithmic trading activity,"
Jim Ritterbusch of Ritterbusch and Associates said in a note.
A series of purchasing manager index (PMI) readings in the
United States and Europe were weaker than expected. German PMI, tracking the manufacturing and services
sectors, hit a seven-year low in July, suggesting a
deteriorating growth outlook for Europe's largest economy. The
fall was driven by the auto sector. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
GRAPHIC: U.S. crude inventories, weekly changes since 2017 https://tmsnrt.rs/2y7mC9g
Contango July https://tmsnrt.rs/2y7o8IC
iran seizes British-flagged oil tanker IMG https://tmsnrt.rs/2O646ZX
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