Oil prices eased on Thursday as oil felt the backwash from a wave of selling across commodities on worries about a slowdown in China's economic boom.
US light crude shed 38 cents to $37.05 a barrel, after rallying to $38.18 on Wednesday, close to a recent 13-year closing high. London Brent slipped 31 cents to $34.00 a barrel.
China, dominant this year in world oil demand growth, has tightened measures aimed at controlling economic growth for fear that boom could turn to bust. Beijing has said it will scrap limits on bank lending rates for risky loans, boosting the market's role in setting rates.
Commodity markets, including gold and cotton, fell on Wednesday after Premier Wen Jiabao told Reuters in an interview that China would take forceful measures to prevent the economy overheating.
"Tightening of credit could be a concern for oil trade and might well have an impact for China's demand growth," said an analyst in Asia who watches China, requesting anonymity. "But oil growth in 2004 will still be strong."
Other factors continue to underpin high world oil prices, cause for some to raise price forecasts.
London's Barclays Capital raised its projection for average US light crude prices in 2004 by $2.50 to $34.50 a barrel, the highest forecast yet seen by Reuters.
Barclays said oil demand forecasts were proving too low. Second quarter stocks were not building as strongly as projected by most supply-demand balances.
"The ground is being laid for a strong fundamental basis for high prices later in the year and Iraq is adding a further geopolitical basis for price strength," said Barclays, saying it had switched to "being bulls with even bigger horns."
Traders cite fears for Iraqi oil supply disruptions following a failed assault at the weekend on Iraq's Basra export terminal. Contractors say the country is struggling to sustain output as funding shortages and security problems delay repairs and field development, compounding worries about sabotage.
Record US gasoline prices also are supportive. US government data on Wednesday showing a 1.4 million-barrel drop in stocks of reformulated clean gasoline used in smog-prone cities, was seen by traders as evidence of a looming supply crunch as summer demand increases.
Refineries are struggling to make enough of a new environmental grade of gasoline being introduced in some US states.
The London-based Centre for Global and Energy Studies (CGES) said in a monthly report that US refiners have not been able to build ample inventories ahead of the peak demand period, unlike in past years.
"Mid-April US gasoline stocks were lower than either of the last two years. The CGES expects US gasoline demand during the peak June-August driving season to average more than 9.4 million barrels per day (bpd) this year, up two percent on the same period last year."
The International Energy Agency, adviser on energy to industrialised nations, called on the Organisation of the Petroleum Exporting Countries to raise output when it next meets in early June to ease prices.
"They must give a signal that will lower prices to allow rebuilding of stocks," said IEA Executive Director Claude Mandil. "If something unexpected happens, there could be a real oil crisis."
But Rafael Ramirez, oil minister for Opec price hawk Venezuela, told reporters in Caracas he saw no plans in Opec to raise supplies. Opec meets on June 3 in Beirut.
Comments
Comments are closed.