Oil falls, but heads for weekly gain as West Asia supply risks persist

Oil prices edged lower on Friday as inflation concerns weighed on demand, but crude remained on track for strong weekly gains amid renewed US-Iran strikes and uncertainty over the Strait of Hormuz

Oil prices fell in early trading on Friday but remained on track for weekly gains as the United States and ​Iran continued trading strikes.

Concerns that accelerating inflation could soften oil ​demand weighed on the market and pressured prices.

Brent futures fell 6 cents, ‌or 0.08 per cent, to $76.24 a barrel by 0125 GMT. US West Texas Intermediate (WTI) crude lost 4 cents, or 0.06 per cent, to $72.04.

For the week, Brent was set for a 6 per cent gain and WTI was headed for a 5 per cent increase.

Iranian armed forces launched attacks on US military infrastructure in Gulf states on Thursday following US strikes on Iran's southern coastal and eastern provinces, further straining a three-week-old ceasefire. Separately, Iranian media reported multiple explosions across southern Iran, including Bushehr, where one of the country's nuclear plants is located.

 

The renewed fighting came the day that Iran ‌buried its slain Supreme Leader Ayatollah Ali Khamenei, the culmination of a week of mass funeral processions and rallies. Khamenei was killed on the first day of the war on February 28.

The conflict has delayed the full reopening of the Strait of Hormuz, a key waterway that about 20 per cent of daily global oil and gas supplies passed through before the war.

"Despite the US ramping up attacks on military sites ​in Iran, the market drew some reassurance from the Trump administration's decision to avoid targeting ‌Iranian energy infrastructure," said Daniel Hynes, the senior commodity strategist for ANZ bank.

"This was aided by comments from President Trump, who said he doesn't expect ​a return ‌to a full-scale conflict."

US President Donald Trump had said on Wednesday he did not think ‌the war would restart and that "anything that happens is going to be over very quickly."

In the US, the number of Americans filing claims for unemployment benefits fell ‌last ​week, indicating that ​the labor market remained in a "slow-hire, slow-fire" mode.

In China, the world's second-biggest economy, producer price inflation surged to a four-year high in June, piling pressure ‌on manufacturers' profit margins ​as weak domestic demand limited pricing power.