London: Oil prices fell on Friday after hitting a three-year high of more than $70 a barrel the previous day, but they were still on track to post a fourth straight week of gains. Brent crude futures traded 55 cents lower at $68.71 a barrel at 1253 GMT. The contract broke above $70 on Thursday for the first time since December 2014.
US West Texas Intermediate crude futures were at $63.14 a barrel, down 66 cents. West Texas Intermediate the day before rose to its strongest since late 2014 at $64.77.
“It is remarkable to see that most market analysts believe that prices have rallied too far since consensus forecasts are significantly lower than the current spot prices,” Hans van Cleef, senior energy economist at ABN Amro, said in a note. “On the other hand, most investors are still positioned to benefit from further price gains,” he said.
Analysts and traders have warned about the risk of a price correction since the start of 2018, but they say overall market conditions remain strong, mainly due to output cuts led by Organization of the Petroleum Exporting Countries and Russia.
Fatih Birol, head of the International Energy Agency, said on Friday that oil prices at $65 to $70 a barrel risked encouraging more oversupply from US shale drillers. But Opec secretary general Mohammed Barkindo said there was “no panic” about rising prices.
In addition to the Opec and non-Opec production cuts of 1.8 million barrels per day (bpd) that are due to last until the end of 2018, oil prices have found support from eight consecutive weeks of US crude inventory drops.
United States commercial crude stocks fell by almost 5 million barrels in the week to January 5, to 419.5 million barrels. That was slightly below the five-year average of just over 420 million barrels, the target for Opec and others cutting output.
Relatively weak Chinese December oil data weighed on prices, traders and analysts said. China’s crude imports in December fell 9 per cent month-on-month to 33.7 million tonnes, or 7.97 million bpd, customs data showed.
Meanwhile in Mumbai, Icra in its report said the continuing surge in crude prices is likely to continue till March, impacting inflation, balance of payments and fiscal policy.
“The surging crude prices will put pressure on inflation, balance of payments and fiscal policy. We believe the rally is likely to continue till March for certain until the winter demand subsides and clarity is reached on the production plans in the United States,” Icra said.