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Oil stable as stronger dollar weighs while China's relentless oil thirst supports prices

Reuters  |  SINGAPORE 

By Henning Gloystein

(Reuters) - prices were stable on Friday, held back by a strengthening but supported by China's relentless thirst for crude amid the OPEC-led supply cuts that have already tightened the market this year.

U. S. West Texas Intermediate (WTI) crude futures were at $56.68 a barrel at 0407 GMT, virtually unchanged from their last settlement at $56.69.

Brent crude futures, the international benchmark for prices, were also little changed, at $62.21 a barrel, up just one cent.

Traders said a stronger dollar, which has gained 0.8 percent this month against a basket of other leading currencies, was weighing on prices.

A rising greenback attracts financial traders who switch investments between commodity futures and foreign exchange.

A strong dollar is also seen by many as a brake on crude prices, as it makes dollar-denominated purchases more expensive in countries that use other currencies.

"A strong could act as a headwind to commodities," Bank of America Merrill Lynch (BoAML) said in its 2018 outlook.

Despite this, China's booming demand will this year overtake the United States as the world's biggest crude importer.

China's crude imports rose to 37.04 million tonnes in November, or 9.01 million barrels per day (bpd), the second highest on record, data from the General Administration of Customs showed on Friday.

"China's crude imports will continue to rise over the coming years, as output declines from several of its giant onshore fields... This will inevitably see become more reliant on crude imports over our forecast period, with import dependency set to increase from a record 68.0 percent in 2017 to nearly 80 percent by 2021," BMI Research said.

Bank of America Merrill Lynch, meanwhile, said robust demand and tight supplies should see Brent crude rise to $70 per barrel by mid-year.

On the supply side, prices have been receiving support from the Organization of the Petroleum Exporting Countries (OPEC) and a group of non-OPEC producers, most importantly Russia, which has been withholding supplies to tighten the market.

Largely because of these voluntary production cuts, prices rose sharply between June and October, with Brent gaining around 40 percent in value.

Threatening to undermine OPEC's goal to tighten markets is U. S. production, which has risen by more than 15 percent since mid-2016 to 9.7 million barrels per day (bpd), the highest level since the early 1970s and close to the output of top producers Russia and Saudi Arabia.

(Reporting by Henning Gloystein; Editing by Joseph Radford and Richard Pullin)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, December 08 2017. 09:50 IST