Oil prices retreat from four-month highs as demand risks come into focus
London — Oil prices fell on Thursday, slipping back from four-month highs as investors focused on the risk that emerging market crises and trade disputes could dent demand.
Benchmark Brent crude oil was down 70c a barrel at $79.04 by 8.30am GMT. US light crude fell $1.15 to a low of $69.22 a barrel.
The International Energy Agency said on Thursday that although the oil market was tightening at the moment, and world oil demand would soon reach 100-million barrels a day, global economic risks were mounting.
"Things are tightening up," the agency said in its monthly report. But, it said: "As we move into 2019, a possible risk to our forecast lies in some key emerging economies, partly due to currency depreciations versus the US dollar raising the cost of imported energy.
"In addition, there is a risk to growth from an escalation of trade disputes."
US companies in China are being hurt by tariffs in the growing trade war between Washington and Beijing, according to a survey, prompting US business lobbies to urge the administration of US President Donald Trump to reconsider its approach.
The White House has invited Chinese officials to restart trade talks just as it prepares to escalate a trade war with China with tariffs on $200bn worth of Chinese goods.
In the short term, the outlook is for tighter supply.
Brent rose above $80 a barrel on Wednesday for the first time since May, spurred by expectations that US sanctions against Iran’s oil exports, which will start in November, will tighten global markets.
US light crude pushed over $70 on Wednesday due to falling US crude inventories and production levels.
The International Energy Agency (IEA) said tightening supply was putting increasing pressure on prices: "The price range for Brent of $70-$80 a barrel in place since April could be tested."
US crude stocks fell by 5.3-million barrels in the week to September 7, to 396.2-million barrels, the lowest since February 2015 and about 3% below the five-year average for this time of year, the US Energy Information Administration (EIA) said on Wednesday.
Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore, said the inventory data showed "a much deeper drop than analyst’s expectations".
US crude oil production fell by 100,000 barrels a day, to 10.9-million barrels a day, as the industry faces pipeline capacity constraints.