Oil prices inched higher on Friday and were on track for a weekly gain as US oil producers in the Gulf of Mexico cut more than half their output because of a tropical storm and as tensions continued to simmer in the Middle East.
However, an International Energy Agency (IEA) forecast for a global oil surplus capped the gains. The agency on Friday predicted that surging US oil output will outpace sluggish global demand and lead to a large stocks build around the world in the next nine months.
OPEC also predicted on Thursday the return of a surplus next year despite an OPEC-led pact to restrain supplies.
Brent crude futures were up 24 cents at $66.76 a barrel by 1215 GMT after hitting a session high of $67.29.
US West Texas Intermediate (WTI) crude futures were up 6 cents at $60.26 after hitting a session high of $60.74.
Brent prices have climbed 4.5% this week while WTI prices have gained 5.5%. Both registered declines last week.
“It is fair to say that OPEC’s best-laid plans to rebalance the oil market have, so far this year, fallen flat,” said Stephen Brennock, analyst at PVM Oil Associates.
“The oil cartel has led from the front in curbing supply since the start of 2019, yet it has failed to quash stubborn oversupply.”
US crude oil inventories have declined for four weeks and prices were also supported by oil companies in the Gulf of Mexico cutting production because of Tropical Storm Barry.
Companies cut more than 1 million barrels per day (bpd) of output -- 53% of the region's production -- as the storm headed for possible landfall on the Louisiana coast on Saturday.
The storm was forecast to become a category one hurricane with winds of at least 74 mph (119 kmh).
The market remained on edge as tensions intensified between Iran and the West. Tehran on Friday said that Britain was playing a “dangerous game” after last week's seizure of an Iranian tanker on suspicion it was breaking European sanctions by taking oil to Syria.
“As things stands, market players are clearly not envisaging a supply shock in the region. Only time will tell whether this turns out to be a case of wishful thinking but one thing is clear: geopolitical risks are here to stay,” said Stephen Brennock, analyst at PVM Oil Associates.
Oil prices edge up on tropical storm and geopolitical tensions