Tuesday, September 9, 2014

Brent drops below $100 as ample supply weighs

A man pumps gasoline at a service station in Caracas August 7, 2014. REUTERS/Jorge Silva/Files
A man pumps gasoline at a service station in Caracas August 7, 2014.
Credit: Reuters/Jorge Silva/Files

By Keith Wallis

(Reuters) - Brent crude eased for a fourth straight session on Tuesday, with prices holding near a 16-month trough below $100 a barrel, amid concerns of ample global supply and slower-than-expected growth in the world's top oil consumers.

Continued output from strife-torn countries such as Iraq and Libya and the shale oil boom in the United States have lessened supply side risks, while slowing growth in western economies and China have raised demand concerns, said Tetsu Emori, a commodity fund manager at Japan's Astmax Co Ltd.

Brent was trading down 33 cents at $99.87 as of 0657 GMT after ending the previous session 62 cents lower. On Monday, prices slid below $100 for the first time in almost 15 months and hit a low of $99.36 - the weakest since May 1, 2013.

U.S. crude was 14 cents higher at $92.80, snapping a three-day losing streak, after falling 63 cents on Monday.

"I expect Brent will be traded between $99-$100 today. Prices below $100 a barrel will be a good opportunity for traders to buy for storage purposes," said Yusuke Seta, a commodity sales manager at Tokyo's Newedge Japan. "The market will try to test the $100 per barrel support line again."

However, hopes for a cut in output by the Organization of the Petroleum Exporting Countries kept a floor under oil prices.

"Oil at below a $100 a barrel is a little bit risky in the current market - $100 per barrel is really a central point for oil countries," Emori said.

Expectations of an OPEC output cut come as Gulf Arab oil ministers gather on Thursday in Kuwait for an annual meeting that could include discussion about price levels.

Top OPEC exporter Saudi Arabia and other OPEC members favour oil at $100 and prices are under pressure due to ample supply even as some OPEC delegates see the lower prices as short-lived.

Astmax's Emori said there was potential for Brent to trade at around $120 per barrel by the end of this year, while U.S. crude could hover around $110-$115 per barrel, on rising winter demand and possible geopolitical concerns.


The market is now waiting for U.S. crude inventory data for clues on the outlook for demand in the world's top oil consumer.

U.S. crude oil stocks likely fell by 1.5 million barrels in the week to Sept. 5, according to a preliminary Reuters analysts' survey on Monday.

The poll was released ahead of weekly inventory reports from industry group the American Petroleum Institute (API) on Tuesday and from the U.S. Department of Energy's Energy Information Administration (EIA) on Wednesday.

Investors were also eyeing developments in the Middle East.

Iraq's parliament approved a new government headed by Prime Minister Haider al-Abadi on Monday in a move to save Iraq from collapse and in what U.S. Secretary of State John Kerry said was a "major milestone".

Libya's oil output has risen to 740,000 barrels per day, the National Oil Corp said on Monday, an increase from 725,000 bpd that has been fuelled by the reopening of several oil export ports.

There was speculation Libyan output could climb further by the end of this month, boosting supplies and putting further pressure on oil prices, Newedge's Seta said.

Elsewhere, the European Union adopted new sanctions on Monday against Russia over the Ukraine crisis, but enforcement will be delayed while an assessment is being done on whether a ceasefire in Ukraine is holding. The measures will target the ability of Russia's top oil producers to raise capital in Europe.

(Editing by Muralikumar Anantharaman and Himani Sarkar)

No comments:

Post a Comment