Published: Thu, May 17, 2018
Business | By Kate Woods

Oil drops as demand shows signs of slowing with price near $80

Oil drops as demand shows signs of slowing with price near $80

"The API inventory data in the US fits with. a topping pattern - or at least a decent pause - for oil prices at the moment", said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

"The only reason why we're not seeing higher prices from here today is the strength of the USA dollar", Tariq Zahir, managing member at Tyche Capital Advisors, told Reuters.

With renewed US sanctions looming against OPEC-member Iran, and oil demand strong, analysts said crude markets will likely remain tight for much of the year.

Oil is priced at $70.05 for WTI, Brent is selling for $78, and Basra Light is going for $74.46.

Brent Crude
Daily July Brent Crude

More than half of the total oil rigs are in the Permian Basin in West Texas and eastern New Mexico, the nation's biggest shale oil field.

ANZ bank said on Thursday that Brent was “now threatening to break through $80 per barrel.

Neil Atkinson, head of the oil industry and markets division at the IEA, told CNBC's "Street Signs" that "the stability of the market" could be at stake.

Asia's demand is at record highs and with rising prices its crude could cost $1 trillion this year, about twice what it paid during the market lull of 2015/2016.

More news: Nirav Modi scam: CBI files 2nd charge-sheet, names Gitanjali Gems and Choksi

Besides lowering its demand outlook, stronger prices also prompted the IEA to increase estimates for supply from Opec's rivals, particularly the US.

A huge boom in oil prices over the past year - with prices rising 75 percent since last July - will also likely have an effect on demand. That risk is real as we are seeing potential geopolitical problems that could potentially cause a shock to the market if we see a price spike due to a sudden loss of supply. As the dollar strengthens, investors can retreat from dollar-denominated commodities like oil.

OPEC, on the other hand, raised their demand forecast by 25,000 bpd from the April report, to 1.65 million bpd.

The agency trimmed its 2018 world demand growth projection by 40,000 barrels a day to 1.4 million a day, projecting total consumption at 99.2 million barrels a day.

More news: Casinos Weigh In on Supreme Court Sports Gambling Decision

Economic crisis has driven Venezuelan production to its lowest in years, while natural decline in Mexico cut production by 175,000 bpd in April, down 8 per cent year-on-year, the largest fall for any non-Opec producer.

The API reported that crude supply increased by 4.845 million barrels versus an expectation of a draw of 1.75 million barrels. "Oil stocks fell across the board and in some cases more than expected, whilst rising exports point to healthy demand for US crude", Commerzbank analyst Carsten Fritsch said. The high price of Brent is attracting US exports.

The most unlikely source of reason in the analytical debate over crude on Wednesday was Iran, whose oil minister Bijan Zanganeh told media that prices at $60 to $65 was "logical"; a source explained this mindset by pointing out, "When oil prices rise due to geopolitical concern and not due to demand and supply and fundamentals, it can not be reasonable".

More news: Shocking Scenes As Masked Intruders Attack Sporting Lisbon Players

Like this: