Published: Wed, August 15, 2018
Finance | By Loren Pratt

Opec confident China-US dispute won't hit demand

Opec confident China-US dispute won't hit demand

The barrel of West Texas Intermediate crude oil shed some additional 50 cents after the close, following the API report offering an unexpected build of United States crude oil stocks last week. Yet, bullish sentiment found some support from expectations that looming USA sanctions against Iran could significantly hamper its crude exports.

Fears that the escalating tensions could lead to a slowdown in global economic growth and a corresponding hit to demand for oil have weighed on crude prices in recent weeks.

US West Texas Intermediate (WTI) crude futures were up 32 cents, or 0.5 percent, at $67.52 per barrel.

The trade dispute is also boosting the USA dollar against emerging-market currencies, and oil consumers in those countries pay more for oil in their local currencies, another potential risk to demand growth.

Turkey is a relatively small oil consumer, accounting for less than 1 million barrels per day (bpd) or around 1 percent of global demand, but Commerzbank analyst Carsten Fritsch says the impact of the Turkish crisis could be considerable. Riyadh told Washington in June it would increase output in attempt to make up for Iranian barrels taken off the market by USA sanctions.

US energy companies last week increased their number of active oil rigs by the most since May, adding 10 rigs to bring the total count to 869, according to the Baker Hughes energy services firm.

The United States has started implementing new sanctions against Iran, which from November would also target the country's petroleum sector.

That was the highest level of drilling activity since March 2015.

Economists, analysts, and investment banks haven't fundamentally altered their assumptions for global economic growth and oil demand growth, but they all warn that trade disputes are adding yet another-quite bearish-wild card to watch for in oil price trends.

Iran ranks second globally in natural gas reserves, fourth in proven crude oil reserves and is the Organization of the Petroleum Exporting Countries (OPEC) third-largest producer, exporting about 2 million barrels of crude per day.

On Monday in its monthly oil market report, OPEC announced crude production was up in July, despite sliding output in Libya and Venezuela, with the price of oil staying essentially the same in July as it was in June. Brent, the worldwide benchmark, shed 0.3% to $72.74 a barrel.

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