Classifieds powered by Gulf News

Oil surges to a nine-month high above $118 per barrel

Fiery rhetoric from Iran leader and Middle East concerns counteracted by China’s crude imports

Gulf News

London: Oil surged to a nine-month high above $118 (Dh433) per barrel on Friday as robust trade data from China strengthened the outlook for demand and rising tension in the Middle East stoked concern over supply.

China’s January exports and imports beat forecasts in a Reuters poll, adding to signs of a rebound in the world’s second biggest oil burner. A rise in China’s crude imports to the third highest daily rate on record in January also buoyed prices.

Brent climbed $1.08 to $118.32 by 1149 GMT, targeting a fourth week of gains, after rising to $118.41. U.S. crude added 49 cents to $96.32.

According to Goldman Sachs, Brent’s rally is “less driven by supply shocks and instead by improving demand”.

“Global oil demand has surprised to the upside in recent months, consistent with the pick-up in economic activity as reflected in the rebound in global PMIs,” it said in a research note. “We expect global inventories to remain tight in the near term.”

The other supporting factor will be tensions in the Middle East and worries about oil supply from the region.

Fiery rhetoric by Iran’s supreme leader, Ayatollah Ali Khamenei, rejecting a US offer for bilateral talks added to concern that the biggest risk factor for oil markets will not be resolved soon.

“The price of a barrel of Brent probably still includes a premium of $10-$15 for the possibility of more significant disruption to supplies,” said commodities economist Tom Pugh of Capital Economics.

“Tensions between the West and Iran should help keep the Middle East risk premium high — and global oil prices above $100 per barrel — at least through the first half of the year.”

Currently US-Iran contact is limited to talks between Tehran and a so-called P5+1 group of powers on Iran’s disputed nuclear programme that are to resume on February 26 in Kazakhstan.

Adding to supply concerns is the instability in Tunisia, located between major oil producers Algeria and Libya, where the assassination of an opposition leader this week led to street riots and violence.

Saudi Arabia kept oil output steady in January, an industry source said, after two months of sharp reductions that surprised oil traders and coincided with a rise in crude oil prices.

China’s strong trade data for January, the first hard economic numbers of the year, showed a surge in exports and imports that was not solely explained by the timing of the Lunar New Year holiday and confirmed the rebound in the world’s second-biggest economy.

“China’s sound import data are also a support for oil,” said a Commerzbank research note.

China’s crude oil imports in January rose 7.4 per cent from a year ago to 5.92 million barrels per day, the third highest daily rate on record, official data showed, as refineries ramped up production ahead of the Lunar New Year.