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Oil prices fall back after jolt from Gulf tanker incident

LONDON – Oil slipped back below $67 a barrel on Thursday as a market torn between a U.S. stock draw and an overall glut of crude in the Atlantic Basin struggled for direction.

Prices were briefly supported by news that Iran’s Revolutionary Guard fired warning shorts over a cargo ship in international waters in the Gulf.

Trade was in a narrow range as players tried to square bullish factors including the U.S. stocks data, spot demand for crude in Asia and Middle East unrest with basic supply fundamentals.

“The market is really in a pause,” said Harry Tchillgurian. “The longer the price stays up, the more you invite supply to come back to the market.”

June Brent crude was trading 10 cents lower at $66.71 a barrel as of 1434 GMT, after trading as high as $67.29. U.S. crude for June delivery, at $60.06, was 44 cents lower, after hitting $60.84.

Most market talk focused on lingering oversupply and shaky economic data globally, which sparked question over the sustainability of prices that are within touching distance of 2015 highs reached last week.

While crude stocks in the United States fell for the second week, by 2.2 million barrels, following four months of steady gains, stockpiles were still almost 90 million barrels higher than this time last year.

Related: Oil rises on Middle East, U.S. output, but IEA report caps gains

“One thing is for sure, there is no prospect of a global oil supply shortage in the foreseeable future,” said Tamas Varga of PVM.

A surprise increase in output in the No. 2 U.S. oil-producing state, North Dakota, in March added to supply concerns. The International Energy Agency also warned on Tuesday that the global oil glut is building.

Global demand growth for fuels was also in question, with uncertain economic indicators pulling crude oil lower during earlier trading.

China, the world’s top energy consumer, saw its economy losing more steam in April despite easier monetary policy, while Europe’s largest economy, Germany, slowed in the first quarter. In the United States, retail sales were flat in April, dampening hopes of a sharp rebound in growth in the second quarter.

Still, the market remained split as speculative bets on higher prices looked to a weaker dollar, which makes commodities purchased in the currency more affordable elsewhere, as well as drawdowns in U.S. stockpiles of diesel and gasoline in advance of the summer driving season.

“The jury is still very much out as to whether the current price level of $65-$70 a barrel in Brent is a true reflection of the global supply/demand balance,” Varga said.

(Additional reporting by Florence Tan in Singapore, Editing by Vincent Baby and William Hardy)

This article was from Reuters and was legally licensed through the NewsCred publisher network.