The price of Brent crude hit $102,6 on Monday morning, after hitting 13-month lows early on last Wednesday.
The price of Brent crude hit $102,6 on Monday morning, after hitting 13-month lows early on last Wednesday.
It appears that markets have continued to shrug off concerns about geopolitical upheavals around the world as oil supplies remained intact.
The $102.37 in early trading on Wednesday was the lowest since July 2013, although Brent recouped its losses to trade up 34 cents at $103.36 a barrel by late afternoon.
"The oil market today looks better supplied than expected,” theInternational Energy Agency(IEA) said in its monthly oil market report on Tuesday.
A glut in the Atlantic Basin and North Sea has compounded the effect of large increases in North American production, which the US Energy Department said averaged an estimated 8.5m barrels per day in July, the highest monthly level of production since April 1987.
Separately, the US Energy Information Administration (EIA) on Wednesday reported a surprise rise in oil inventories of 1.4m barrels last week, including a 418,000 barrel increase at Cushing, Oklahoma – the delivery point of the US crude contract.
Nymex September West Texas Intermediate held steady at $97.42, after falling to a low of $96.75 in earlier trading.
Although the situation in several key oil producing countries "remains more at risk than ever” as armed conflicts across the Middle East and north Africa escalate, supplies so far have been unaffected, the IEA said.
According to the Financial Times’ article on IEA’s report, the 200,000 barrel a day Ras Lanuf terminal inLibyahad its first loading on Wednesday since the end of the blockade last month. Alongside the potential resumption of loadings at the 350,000 b/d Es Sider terminal this week, this could add more crude to the oversupplied Atlantic Basinmarket, analysts said.
Iraqis less of a risk to supply than infrastructure bottlenecks in the oil producing southern region, while US and EU sanctions imposed onRussiaare also likely to pose little threat, the IEA added.
At the same time, weak refining activity across Europe and the US and a drop in Chinese crude imports as part of their stock build-up prompted the IEA to slash global demand forecasts by around 300,000 barrels a day from its previous monthly report to 1mb/d.
The estimate was in stark contrast to comments made earlier this year in expectation of a tight market in the second half of 2014.
The agency also lowered 2015 forecasts ahead of expected weaker Chinese and Russian growth and stronger non-oil power sector use in Japan.
"Given that ICE Brent has now decidedly broken the recent lows, a short-term test of the $100 level may very well be on the cards,” said analysts at JBC Energy.
"Even though markets are looking weak, the contango structure in the Brent market might soon incentivise more buying for storage and set in motion the much-needed clearance of the light-sweet overhang in the Atlantic Basin,” they added.
While concerns about immediate supply disruptions have proved unfounded, having little bearing on the spot price – which has fallen from $115 in mid-June – geopolitical uncertainty is still reinforcing support forlong-dated oil pricing.
Separately, remarks made by Iran’s supreme leader refocused market attention on Iran’s fraught relationship with Washington.
Ayatollah Ali Khamenei, said on Twitter and his own website that although negotiations on nuclear matters would continue, talks on other issues were not worth pursuing, deeming them "useless”.
"There are no benefits in having relations or negotiations with the United States, except in certain specific cases,” Ayatollah Khamenei told a gathering of Iranian diplomats, according to a statement cited by Reuters.
The nuclear talks, which involve the UK, China, France, Germany, Russia and the US, have culminated in an interim deal whereby Tehran has curbed some atomic activity in exchange for limited sanctions relief.
"There are still major differences between Iran and the P5+1 powers over the terms of a comprehensive deal,” said Richard Mallinson at the London-based consultancy Energy Aspects. "Most comments from the supreme leader about the nuclear talks remain quite ambivalent.”
"Negotiations over the next four months would prove very challenging even without the situations in Iraq and elsewhere in the region competing for attention,” he added.
