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Oil prices continue five-day rally

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OIL prices rose yesterday for a fifth day running in a trend supported by a drop in United States’ inventories and investor expectations that Federal Reserve will lower borrowing costs for the first time since the financial crisis more than a decade ago.

Brent crude futures LCOc1, the international benchmark for oil prices, were up 40 cents, or 0.6 per cent, at $65.12 a barrel while U.S. West Texas Intermediate crude CLc1 gained 20 cents or 0.3 per cent to $58.25 a barrel.

Central bankers in the U.S. began their two-day meeting on Tuesday and were expected to cut interest rates, with President Donald Trump reiterating his call for a large cut.

The move has long been anticipated and represents a double boon for oil prices – on one hand, it should encourage U.S. oil demand and on the other, it will apply downward pressure on the dollar.

Oil stockpiles fell again last week, along with gasoline and distillate inventories, data from the American Petroleum Institute industry group showed. Crude inventories also fell by six million barrels to 443 million barrels in the week ended July 26 against a forecast for a drop of 2.6 million barrels.

While tensions in the Middle East remain high, providing another bullish catalyst for prices, with the United States formally asking Germany to join France and Britain to help to secure the Strait of Hormuz after the seizure of a British tanker by Iran, Libya’s Sharara oilfield was shut down on Tuesday after a problem with a valve on the pipeline linking it to the Zawiya oil terminal. But Germany has expressed scepticism about the request.

British Petroleum Finance Chief, Brian Gilvary, said the British company has not taken any of its oil tankers through the Strait of Hormuz since a July 10 attempt by Iran to seize one of its vessels.

Although, expectations are low for progress after combative remarks from President Trump, a survey showed that China’s factory activity shrank for the third month in a row in July, underlining the growing strains placed by the trade war on the world’s second-biggest economy and one of the biggest oil consumers.

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