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Oil surrendered an early gain July 19 as Tehran denied President Donald Trump’s claim that the U.S. downed an Iranian drone near the Strait of Hormuz, an assertion which had earlier helped oil snap back from four days of losses.
Futures were down 8 cents in New York after erasing an earlier 1.9% increase, heading for the steepest weekly decline since May. The initial rise came after the president’s assertion July 18 that a U.S. warship “immediately destroyed” the Iranian drone that approached the USS Boxer. Iran’s Deputy Foreign Minister Seyed Abbas Araghchi denied the loss in a tweet, joking the United States might have shot down a drone of its own.
Oil is down more than 8% this week as fears of waning demand outweigh concern that an increase in tensions could curtail oil shipments through the Strait of Hormuz. The U.S.-China trade spat persists as well, with Trump reiterating July 16 that he could impose additional tariffs on China. U.S. fuel stockpiles also unexpectedly expanded.
“The biggest factor driving oil prices today is the Iran- U.S. tension story,” says Phil Flynn, senior market analyst at Price Futures Group Inc. “Yesterday, the announcement by the president that the U.S. had shot down the drone reignited fears of escalating tensions. After Iran’s denial, the market is now pulling back a little saying maybe this won’t be an international incident.”
West Texas Intermediate for August delivery slipped 8 cents to $55.22 a barrel on the New York Mercantile Exchange on July 19.
Brent for September settlement rose 15 cents to $62.08 a barrel on the ICE Futures Europe Exchange. The global benchmark crude traded at a premium of $6.68 to WTI for the same month.