LONDON, June 20 (Reuters): Oil jumped more than 3.0 per cent to above $63 a barrel on Thursday after Iran shot down a US military drone, raising fears of a military confrontation between Tehran and Washington.
Also supporting oil were expectations that the US Federal Reserve could cut interest rates at its next meeting, stimulating growth in the world's largest oil-consuming country, and a drop in US crude inventories.
Brent crude, the global benchmark, was up $1.38 at $63.20 a barrel at 0854 GMT, having risen 3.3 per cent to $63.88 earlier in the session.
US West Texas Intermediate crude rose $1.45 to $55.21.
"It's a combination of factors," Petromatrix analyst Olivier Jakob said of the price rise. "You have more supportive stocks data, the Fed indicating they will cut rates and the shooting down of the drone."
The drone was downed in international airspace over the Strait of Hormuz by an Iranian surface-to-air missile, a US official said. Iran's Revolutionary Guards said the drone was flying over southern Iran.
Tension has been rising in the Middle East, home to over 20 per cent of the world's oil output, after attacks on two tankers near the Strait of Hormuz, a chokepoint for oil supplies. Washington blamed Tehran for the tanker attacks. Iran denied any role.
Concern about slowing economic growth and a US-China trade dispute has pulled oil lower in recent weeks. Brent reached a 2019 high of $75 in April.
Also propelling oil higher on Thursday was a larger-than-expected decline in US crude inventories and the prospect of prolonged supply restraint by producer group OPEC and its allies. After swelling to near two-year highs, US crude stocks fell by 3.1 million barrels last week, compared with analyst expectations for a draw of 1.1 million barrels, the Energy Information Administration said on Wednesday.
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