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Plentiful supply keeps oil prices lower

Tuesday, August 05 15:23:07

Brent crude oil slipped below $105 a barrel today as ample supply in the Atlantic basin outweighed worries that turmoil in the Middle East and North Africa could disrupt production.

"On the one hand you see geopolitical tensions ... but on the other hand you see maintenance from refineries and enough supply," said Hans van Cleef, senior energy economist at ABN Amro in Amsterdam.

Brent crude was down 48 cents $104.93 by 1345 GMT, after gaining 57 cents on Monday.

U.S. crude was down 20 cents at $98.09, after rising 41 cents in the previous session to settle at $98.29 a barrel.

Global oil demand has been running below supply over the last few months, building up a glut of high quality crude oil in the West African, European and Asian markets.

Growth in China's services sector slowed sharply in July to its lowest level in nearly nine years, indicating a recovery in the broader economy is still fragile and may need further government support.

Brent closed at $104.84 a barrel in Friday, its lowest settlement since April 2, while Brent for immediate delivery has been at a discount to futures for the longest period since 2011. This contango market structure indicates a well-supplied market.

"At this moment the market is mainly supply driven," said van Cleef.

Libyan oil output dropped to around 450,000 barrels per day (bpd) from 500,000 bpd last week. State-run National Oil Corp says oilfields are secure despite clashes between rival militias in the capital, Tripoli.

Oil production has dropped from 1.4 million bpd a year ago because of strikes by oil guards and fighting that has damaged Tripoli's main airport and sent foreign diplomats and workers fleeing abroad.

Oil exports from Iraq, OPEC's second-largest producer, rose to an average of 2.442 million bpd in July from 2.423 million in June, the oil ministry said on Monday, even though Islamic State insurgents tightened their grip in the north.

A Reuters survey of analysts suggested U.S. commercial crude oil inventories fell by about 1 million barrels in the week to Aug. 1, while gasoline stocks were unchanged. (Reuters)

For more visit: www.businessworld.ie