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

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

The oil price spread that'll determine the type of crude bought by Asia in the wake of US sanctions on Iran is now in favor of American supply.

Brent crude hit a new high of over US$79 a barrel on data about higher demand in key markets such as China and OPEC's bullish Monthly Oil Market Report, in which the cartel said the global overhang in oil inventories is all but gone.

U.S. West Texas Intermediate (WTI) crude futures were at $71.09 a barrel, up 13 cents and also not far off their November 2014 high of $71.89 a barrel reached last week.

Global benchmark Brent gained $1.11 to settle at $78.23 a barrel. The production growth may be far from over, contributing to USA crude´s discount to Brent, analysts said.

World oil prices have surged by more than 70 percent over the past year as demand has risen sharply but production has been restricted by the Organization of the Petroleum Exporting Countries, led by Saudi Arabia, and other producers including Russian Federation.

The United States has announced it will impose sanctions on Iran over its nuclear program, raising fears that markets will face shortages later this year when trade restrictions take effect.

US President Donald Trump's decision to reintroduce sanctions on Iran have thrown a curveball into Middle East relations, with many expecting this to have continued ripples throughout the world and region.

On the other hand, US production is growing at a pace that made traders hesitate last week after Baker Hughes reported yet another increase in drilling rigs.

"A rising oil price brings upside price risk to all commodities", Morgan Stanley said in a note this week.

Crude sticking to highs as U.S. withdrawal from Iran program continues to boost prices.

OPEC figures published on Monday showed oil inventories in OECD industrialized nations in March fell to 9 million barrels above the five-year average, from 340 million barrels above the average in January 2017.

In a monthly report issued Monday (https://www.eia.gov/petroleum/drilling/#tabs-summary-2), the Energy Information Administration said crude-oil production from seven major USA shale plays is expected to see a climb of 144,000 barrels a day in June to 7.178 million barrels a day.

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