Investing.com - Oil prices rose on Friday after U.S. President Donald Trump confirmed that the Navy had shot down an Iranian drone in the Persian Gulf area.
Crude shot up 2% to intraday highs overnight but later pared gains after Iran denied the report.
New York-traded West Texas Intermediate crude futures rose 40 cents, or 0.7%, to $55.70 a barrel by 8:32 AM ET (12:32 GMT), while Brent crude futures, the benchmark for oil prices outside the U.S., gained 62 cents, or 1.0%, to $62.55.
Abbas Araqchi, Iranian deputy foreign minister contradicted Trump’s claim, saying that Tehran had “not lost any drone in the Strait of Hormuz nor anywhere else” and said that the U.S. may in fact have shot down one of its own by mistake.
Tensions remain high in the area where tankers have been attacked amid growing tension between Washington and Tehran over Iran’s nuclear program. The Strait of Hormutz is a key shipping route for oil and conflict in the region runs the risk of restricting oil supply.
Both parties have now also reportedly destroyed each other’s drones and, according to Investing.com’s senior commodity analyst Barani Krishnan, seem ready for further conflict despite also suggesting they want to hold negotiations.
“While few may want to give the U.S.-Iran style of gunboat diplomacy a chance, oil bulls should never be too complacent that there will be no breakthrough here - because on the off-chance there is one, another crude price collapse is very likely,” Krishnan said.
Friday’s gains broke a four-day losing streak but oil remains on track for hefty weekly declines of 7.5% in the case of U.S. crude and 6.3% for Brent.
Oil has remained under pressure since weekly data from the Energy Information Administration showed the U.S. market awash with refined products last week.
Oil has remained under pressure since weekly data from the Energy Information Administration showed the U.S. market awash with refined products last week.
Reports of potential talks between the U.S. and Iran contributed this week to an already sharp decline in oil prices after Hurricane Barry passed without causing as much damage as feared.
The U.S. government said on Thursday that 335,000 barrels of oil a day of output was still shut in, while 9% of production platforms were still unstaffed.
Analysts at consultancy Rystad Energy noted that production outages had peaked at 1.4 million barrels a day and had lasted longer than is usual.
"It wasn't the strength of the storm or wind gusts that led to the outages, but timing and location," they said
Oil has remained under pressure since weekly data from the Energy Information Administration showed the U.S. market awash with refined products last week.
Oil has remained under pressure since weekly data from the Energy Information Administration showed the U.S. market awash with refined products last week.
Elsewhere Friday, oil services firm Schlumberger (NYSE:SLB) said it expected price to remain "range-bound around present levels", against a backdrop of slowing U.S. production growth and output restraint coordinated by OPEC and Russia.
"We continue to see U.S. shale oil as the only near- to medium-term source of global production growth," it said in a press release detailing quarterly results, "albeit at a slowing growth rate, as (exploration and production) operators continue to transition from a focus on growth to a focus on growth and returns."
In other energy trading, gasoline futures advanced 0.8% to $1.8481 a gallon by 8:36 AM ET (12:36 GMT), while heating oil gained 1.1% to $1.8825 a gallon.
Lastly, natural gas futures slipped 0.1% to $2.285 per million British thermal unit.