Brent weakens below $103 on rising supply
London, August 22, 2014
Brent crude oil futures drifted lower on Friday, further below $103 a barrel, as a strong dollar and plentiful supplies continued to pressure prices.
October Brent crude was down 13 cents to $102.50 a barrel by 1122 GMT. US crude was down 26 cents at $93.70 a barrel.
Traders and analysts said the market appeared to be pausing after hefty sell offs which have driven Brent to its lowest level since June 2013.
"We've reached a stage where the market is looking to stabilise a bit," said Ole Hansen, senior commodity strategist at Saxo Bank. "But we are still in a downward trend, as supply is rising."
"We are in a sideways range and we will break out of this to the downside," agreed Christopher Bellew, an oil broker at Jefferies in London. "There is oversupply, and that is demonstrated by the contango going out to April 2015."
A contango describes a market structure where prompt barrels trade more cheaply than those for delivery at future dates. ICE Brent futures reflect this, with the October contract trading at a 74 cent discount to the November contract.
Hansen pointed to Libya, which is gradually increasing its oil production after reopening several eastern ports. It has loaded a second tanker at Es Sider, its largest oil export terminal, after being shut for a year.
Libya's oil production, although still below the year-ago levels of about 1.4 million barrels per day (bpd), has risen to 612,000 bpd. This is well above the lows of 100,000 bpd seen earlier this year.
In addition, exports from Iraq remain near record volumes despite the Islamic insurgency in the north. Crude is also being exported from Iraqi Kurdistan via Turkey in defiance of Baghdad.
The shale oil boom helped the United States pump the most oil in a month in 28 years in July, sending crude imports to 19-year lows, industry group American Petroleum Institute said on Thursday.
Plentiful supplies mean that physical crude cargoes have been changing hands at multi-year lows in recent weeks as sellers struggle to offload unwanted barrels in the face of weak refinery demand. This has prompted a large liquidation of positions in the futures market.
"Worldwide seaborne crude oils are still under pressure and fighting each other for outlets," added Olivier Jakob, an oil analyst at Petromatrix in Switzerland.
A run higher in the US dollar has also put downward pressure on oil, as this makes dollar-denominated commodities more expensive for holders of other currencies.
The dollar was just below its 2014 peak against a basket of major currencies on Friday boosted by upbeat US manufacturing data, a strong US jobs market recovery and hints from the US Federal Reserve that interest rates could rise sooner than expected.
Investors waited for a speech by Federal Reserve Chair Janet Yellen later on Friday at the central bankers' meeting in Jackson Hole. - Reuters