Oil pulls back from multi-year highs on China economy fears

May 18, 2018, 14:17
Oil pulls back from multi-year highs on China economy fears

US West Texas Intermediate (WTI) crude futures were up 29 cents at $71.78 a barrel.

A stronger dollar.DXY makes oil more expensive for importing nations such as those in Asia, which are facing a trillion dollar bill for their imports this year as demand in the continent reaches a record high.

Brent crude settled up 2 cents at $US79.30 a barrel on London's ICE Futures exchange.

Oil's rise to $80/bbl is stoking concerns that the price rally will erode demand, but OPEC's giants so far aren't anxious.

On May 8 President Donald Trump announced his decision to withdraw the United States from the Iran nuclear deal, also pledging to reinstate the anti-Iranian sanctions that were lifted as a result of the agreement.

Members of the Organization of Petroleum Exporting Countries, including Saudi Arabia, Kuwait and the United Arab Emirates, said they have enough capacity to fill in any supply gap if renewed sanctions curtail Iran's exports.

Russian companies also traded with Iran when USA sanctions were in place before the deal.

A worker walks at the Zubair oilfield in Basra, Iraq May 9, 2018.

The worldwide glut has been eradicated and "Opec still hasn't said anything about ending the deal early, which is only good for markets", said Ashley Petersen, lead oil analyst at Stratas Advisors in NY. The 50 percent rise in oil prices in the a year ago is encouraging major companies such as ExxonMobil (XOM.N), Royal Dutch Shell (RDSa.L), Chevron (CVX.N), BP (BP.L) and Total (TOTF.PA) to increase output.

"Clearly the recent rise in oil prices is going to pose a problem for some central banks due to the temporary impact it will have on the inflation data, especially when you consider that in the past year, Brent crude prices are up more than 50 percent", Craig Erlam, senior market analyst at Oanda trading group, told AFP.

The two ministers, in a joint statement, blamed volatility in prices on worldwide political tensions.

Analysts say the glut that had weighed on prices for the past three years has finally been eliminated, thanks to strong demand in key markets like China and output cuts by OPEC and its non-cartel partners including Russian Federation.

"The recent jump in oil prices will take its toll", said the IEA, which advises most major economies on energy policy.

Since then it has fallen sharply, sliding below 30 dollars at the start of 2016, thanks to the combination of a supply glut partly thanks to U.S. shale oil production, and weakness in some economies lowering demand.

The IEA noted that Iranian oil exports now total about 2.4 million barrels a day.

It trimmed its 2018 world demand growth projection by 40,000 barrels per day to 1.4 million bpd, projecting total consumption at 99.2 million bpd.