U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Friday amid concerns that global economic weakness will lead to lower demand. However, losses are likely being limited by worries that an escalation of tensions between the U.S. and Iran will lead to a supply disruption.

At 09:53 GMT, August WTI crude oil is trading $56.70, down $0.64 or -1.12% and September Brent crude oil is trading $63.45, down $0.37 or -0.58%.

It seems this week that each piece of potentially bullish news was outweighed by a concern.

Earlier in the week, OPEC and its allies agreed to extend their plan to trim production, reduce inventory and stabilize prices for nine-months, or until March 2020. On paper, this is potentially bullish. After all, virtually the same strategy has been holding up prices since January 1. However, some traders wanted to see bigger cuts to offset increasing U.S. shale production.

On Wednesday, the U.S. Energy Information Administration (EIA) reported a weekly decline of only 1.1 million barrels in crude stocks. This was lower than the forecast and much smaller than the 5 million barrel draw reported late Tuesday by the American Petroleum Institute (API). The discrepancy suggests that oil demand could be slowing amid signs of a weakening U.S. economy.

With data from the EIA and API seemingly offsetting the OPEC-led attempt to stabilize inventory and prices, the wild card remains the relationship between the United States and Iran.

According to the timeline, concern about the possibility of US military action against Iran has grown since the administration cited new intelligence that Iran or its proxies were planning to attack U.S. troops or American tourists in the Middle East.

Furthermore, the United States blamed Iran for attacks on oil takers near the Strait of Hormuz, and most recently, Iran shot down a U.S. drone.

Earlier this week, President Hassan Rouhani’s said that Iran could enrich to “any amount we want” in the absence of a nuclear deal. This prompted President Trump to warn him to “be careful with the threats… they can come back to bite you like nobody has been bitten before.”

In the meantime, the Trump administration continues to lay the legal groundwork for a strike.

Daily Forecast

Crude oil traders will be watching closely the U.S. Non-Farm Payrolls report, due to be released at 12:30 GMT. A weaker-than-expected report will likely drive prices lower since this will support the case for lower future demand.

Traders expect Non-Farm Payrolls to indicate the economy added 162K jobs in June. Average Hourly Earnings are expected to have increased 0.3% and the Unemployment Rate is forecast to remain steady at 3.6%.