TOKYO (REUTERS, BLOOMBERG) – Oil extended gains on Monday (July 22) as tensions remained high in the Middle East after Iran seized a British tanker in the Straits of Hormuz on Friday, and Libya’s largest oil field declared force majeure after interference by an unidentified group shut down production.

Brent crude futures were up 51 cents, or 0.8 per cent at US$62.98 a barrel by 0042 GMT, adding to Friday’s 0.9 per cent gain. The international benchmark rose to as high as US$63.47 earlier.

West Texas Intermediate (WTI) crude futures were up 15 cents, or 0.3 per cent, at US$55.78.

“Falling global demand and rising US stockpiles have helped turn oil charts very bearish, but that may not last as tensions remain high in the Persian Gulf,” Edward Moya, senior market analyst at OANDA in New York, said in a note.

Iran’s Revolutionary Guards said they had captured a British-flagged oil tanker in the Gulf after Britain seized an Iranian vessel earlier this month, ratcheting up tensions along a vital international oil shipping route.

Britain was weighing its next moves on Sunday, with few good options apparent as a recording emerged showing that the Iranian military defied a British warship when it boarded and seized the ship three days ago.

Prime Minister Theresa May’s office said she would chair a meeting of Britain’s emergency response committee on Monday morning to discuss the crisis.

A senior United States administration official said on Friday the US will destroy any Iranian drones that fly too close to its ships.

A day earlier, the US said one of its navy ships had “destroyed” an Iranian drone in the Strait of Hormuz after the aircraft threatened the vessel, but Iran said it had no information about losing a drone.

Meanwhile, Libyan oil output dropped to its lowest in five months after the disruption at the Sharara field. Production at the facility was gradually resuming after a valve issue was resolved, according to two people familiar with the matter.

The International Energy Agency (IEA) does not expect oil prices to rise significantly because demand is slowing and there is a glut in global crude markets, the Executive Director Fatih Birol said on Friday in public comments.

The IEA is reducing its 2019 oil demand growth forecast to 1.1 million barrels per day from 1.2 million bpd due to a slowing global economy, Birol told Reuters in an interview a day earlier.