Oil prices were steady on Tuesday with both Brent and US WTI rising slightly.  Analysts say concerns over US sanctions restricting Iranian crude exports buoyed oil prices, but concerns that China’s economic growth may be slowing capped gains.  Anadarko photo.

Strong US dollar puts a lid on rising oil prices

On Tuesday, oil prices retreated from over-three-year highs reached early in the session after data showed China’s economic growth may be slowing.  The rising US dollar also limited gains in crude prices recently supported by the reimposition of US sanctions against Iran which will restrict crude exports from the OPEC country.

By 2:12 p.m., EDT, benchmark Brent was up 36 cents to $78.59/barrel after reaching an intraday peak of $79.47/barrel.  US West Texas Intermediate was up 19 cents to $71.15/barrel.  The Canadian Crude Index was up 67 cents to $51.06.

“You had a series of weak economic data points overnight,” John Kilduff, a partner at Again Capital Management told Reuters.

Weaker-than-expected investment and retail sales as well as a drop in home sales in China were reported in April.  As well, policymakers continue to try to calm a heated trade dispute with the US as well as deal with debt risks.

Following the release of the data from China, analysts grew concerned that near-record high refinery runs noted in April could be short-lived.  Last month, refinery runs in China hit about 12.06 million barrels per day (b/d), up nearly 12 per cent from the same period last year.

The strengthening US dollar also impacted oil prices as investors using other currencies tend to retreat from dollar-denominated commodities like oil.

The OPEC supply cut agreement and concerns about the US reinstating sanctions against Iran continued to underpin oil prices.

The Trump administration announced last week that it will abandon the 2015 Iran sanctions relief agreement and reimpose sanctions on the Middle Eastern country.   The Trump decision means Iran’s oil exports will be curbed, and the amount of crude available on the world market will be reduced.

As a result of production cutbacks agreed to by many OPEC countries and other oil producing nations, including Russia, under the OPEC supply cut agreement, the global glut of crude that caused oil prices to plummet in 2014 has all but been eliminated.

According to OPEC data, in March, crude inventories in OECD industrialized nations fell to 9 million barrels over the five-year average.   This is down from 340 million barrels over the average in January 2017.

A significant increase in US production 1o 10.7 million b/d has resulted in US crude trading at a widening discount to benchmark Brent.

The US Energy Information Administration reported on Monday that US shale production is expected to rise by about 145,000 b/d to a record high of 7.18 million b/d next month.