July 13, 2012 8:27 pm

Brent rises to two-month high

Brent crude finished the week at a two-month high supported by a new wave of US sanctions against Iran and expectations of Chinese monetary stimulus helping demand in the second half of the year.

The global crude benchmark rose to a two-month high of $102.58 a barrel on Friday after an eventful week.

Brent crude briefly eased below the $100 level on Tuesday after the Norwegian government averted a strike on offshore oil rigs.

However, the 17-day Norwegian strike had tightened the physical oil market, already feeling the impact of European Union sanctions against Iran, which took effect on July 1.

With supply disruptions in Libya, Argentina and the Niger Delta, “oil-specific factors have no doubt improved markedly over the past few weeks and should help to support prices around $100 per barrel”, despite macroeconomic worries, said Amrita Sen at Barclays in London.

The oil market received a further boost on Thursday after the Obama administration unleashed a fresh wave of sanctions against Iran, announcing new financial restrictions and accused dozens of shipping companies of secretly transporting crude oil.

The US government highlighted “Iran’s attempts to evade sanctions through the use of front companies, as well as its attempts to conceal its tanker fleet by repainting, reflagging or disabling GPS devices”.

After falling to near 22-year lows at 3.2m barrels a day, Iranian production is predicted to fall below 3m barrels a day for the first time since 1990. In its monthly report on the oil market published this week, the International Energy Agency, the western countries’ oil watchdog, said that “volumes could fall significantly in July”, and analysts expect the new US measures to hit Iranian output further.

Although Chinese GDP figures for the second quarter came in at 7.6 per cent, down from 8.1 per cent, the figures were “consistent with a gradually slowing economy rather than an imploding one”, said analysts at Standard Bank.

Lower interest rates are expected to support economic growth in the second half, lifting oil demand in China, the second-largest importer of crude oil after the US.

In its latest monthly report, the International Energy Agency said the country’s demand growth had “eased back sharply recently”, with year on year growth at 0.3 per cent in April and 0.8 per cent in May, compared to the average demand growth of 13 per cent in 2010.

However, in the second half of 2012, demand is expected to grow by 5 per cent, leading to an average demand expansion of 4 per cent for the whole year, said the IEA.

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