HOUSTON, Oct. 12 (Xinhua) -- Oil prices surged for the week ending Oct. 11 amid fears over disruption in crude production following the Iranian tanker attack in the Red Sea on Friday as well as positive prospect of trade talks between China and the United States, with the price of West Texas Intermediate (WTI) for November delivery up 3.60 percent and Brent crude oil for December delivery down 5.72 percent.
Two separate explosions hit an Iranian oil tanker in the Red Sea 60 miles off Saudi Arabia's Jeddah port city on Friday morning. The explosions, possibly caused by "missile strikes," resulted in serious damage to the vessel and oil spilling to the sea, according to reports.
The prices of oil jumped by more than 2 percent on Friday, and Brent crude climbed to 60 U.S. dollars again as investors worried the attack may reignite another round of Mideast risk.
WTI closed the week at 54.70 dollars a barrel on the New York Mercantile Exchange, while Brent crude finished the week at 60.51 dollars a barrel on the London ICE Futures Exchange.
WTI and Brent crude prices have increased 20.46 percent and 12.47 percent, respectively, so far this year, falling from their peak levels in April when the growth of WTI hit over 40 percent, and Brent crude over 30 percent.
From Monday to Wednesday, oil held losses near a two-month low as pessimism persisted over the global economic outlook and American crude inventories expanded more than expected.
For the week ending Oct. 4, U.S. commercial crude oil inventories increased by 2.927 million barrels from the previous week, more than the market expected growth of 1.413 million barrels, implying weaker demand and bearish for crude price.
However, the gains on Thursday and Friday, mainly due to the potential production cut of the Organization of the Petroleum Exporting Countries (OPEC) and the attack on Iranian target, outpaced the loss.
Meanwhile, the latest round of China-U.S. trade talks provided floor for the oil prices by offering hope for hiking demand.
Oil prices have kept gaining momentum since the start of the year due to some geopolitical concerns and OPEC's decision of production cut. The momentum has slowed down, mainly because of the concerns over downturn in demand for crude oil.
The slowing global economy continued to be a major headwind for crude oil. The slower economic growth of the world, mainly due to the trade disputes between the United States and China, will lead to less demand for oil, which in turn would put downward pressure on oil prices.
The International Energy Agency (IEA) cut forecasts for growth in global oil demand, noting that global oil demand will increase this year by the least since 2016, by just 1 million barrels a day, while growth in the amount of crude processed by refineries worldwide will be the lowest in a decade, at just 150,000 a day.
The U.S.-China trade tensions and rising U.S. oil production are the biggest concerns contributing to fears of a global glut.
According to IEA, even though demand growth will accelerate next year to 1.2 million barrels a day, a further surge in production from the United States and elsewhere could unleash another surplus.
While the attacks in Saudi Arabia squeezed output in OPEC to the lowest since 2009, the IEA's report indicated that the group produced 28.83 million barrels a day last month, yet only 28.2 million a day will be required in the first six months of next year.
In the meantime, U.S. Energy Information Administration (EIA) forecast that Brent spot prices will average 59 dollars per barrel in the fourth quarter of 2019 and then fall to 57 dollars per barrel by the second quarter of 2020, which is 5 dollars per barrel lower from its previous forecast in September.
Moreover, a rising U.S. dollar in the past months has dragged down the greenback-denominated crude futures as the U.S. Dollar Index has been keeping uptrend since mid-2018, although the U.S. Dollar Index finished the week ending Oct. 11 on its lows near 98.30.
Next week, the market will likely try to break below the 98.00 handle, according to analysts. Oil is mostly traded in dollar all over the world and a stronger dollar pressures the oil demand.
For the upcoming week, the market will watch closely over the Middle East situation and the development of U.S.-China trade talks.
Analysts are worried that the Iranian tanker explosions may spur fresh concern about potential conflict in the Middle East after attacks on ships and drones earlier this year and last month's strike on Saudi Arabian energy infrastructure.
Meanwhile, analysts believe the buoyant sentiment will support oil prices following the latest round of high-level economic and trade consultations between China and the United States.
China and the United States achieved substantial progress in multiple areas after holding a new round of high-level economic and trade consultations on Thursday and Friday in Washington.
The two sides achieved progress in agriculture, intellectual property rights protection, exchange rate, financial services, expansion of trade cooperation, technology transfer and dispute settlement.
The two sides also discussed the arrangement for future consultations, and agreed to make joint efforts toward eventually reaching an agreement.
