Brent oil looses steam, trades under $97 on China concerns

21 January 2011 21 January 2011

BonTrade

Brent oil prices open Friday’s trading session back near $97 a barrel after new concerns that China’s economy maybe overheating knocked two percent off oil futures yesterday.

Latest Brent Oil Price

In London, Brent crude oil futures for March 2011 delivery was trading at $96.80, 06.30 GMT this morning on the ICE Futures Exchange.

China Economy Concerns see Commodities Sell Off

China’s economy grew 9.8% during the last three months of 2010, according to the latest Chinese government figures, but inflation in the country remains high, a concern that numerous rounds of monetary tightening have been ineffective at controlling consumer prices.

“The concern is that inflation is getting away from itself there, and they’re going to have to rein that in. That is causing a sell off in commodities.” said Matt Smith, analyst at Summit Energy.

China is the world’s second largest crude oil consumer, using up an average of more than 10 million barrels a day in November 2010 for the first time ever.

Chinese Yuan Currency Concerns

A US Treasury official sharply criticised China’s foreign exchange policies on Thursday as Chinese President Hu Jintao met with political figures during a state visit in the US capital.

“China still closely manages the level of its exchange rate and restricts the ability of capital to move in and out of the country. These policies have the effect of keeping the Chinese currency substantially undervalued.” said Treasury Assistant Secretary Charles Collyns.

China and Iran, Latest Oil Deal

Meanwhile, China has renewed crude oil import pacts with Iran for 2011 by keeping the total supply amount almost the same as last year at about 460,000 barrels per day.

Chinese state oil trader Zhuhai Zhenrong Corp, the world’s largest lifter of Iranian crude by company, has agreed with National Iranian Oil Co (NIOC) to buy 240,000 barrels per day of Iranian crude for 2011.

Iran is China’s number three crude oil supplier after Saudi Arabia and Anogla, exported 19.59 million tonnes of crude oil to China in the first 11 months of 2010, or nearly 430,000 barrels per day.