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Brent holds near 14-month low

Wednesday, August 20 08:22:04

Brent crude futures steadied near 14-month lows above $101 a barrel on Wednesday, with ample supplies putting prices at risk of further losses as worries over geopolitical tensions ease.

The oil benchmark has fallen more than 12 percent from this year's peak of $115.71 reached in June due to the turmoil in Iraq. While the conflict there continues, there has been no significant disruption to oil supply from the No. 2 OPEC producer, giving space for a sustained retreat in prices.

Brent crude for delivery in October was off 8 cents at $101.48 a barrel by 0631 GMT. The contract fell to $101.07 on Tuesday, its lowest since June 26, 2013.

Lukoil, Russia's second biggest oil producer, said on Tuesday it had shipped 1 million barrels of oil produced from southern Iraq's giant West Qurna-2 oilfield, its first shipment from the field, despite a surge of violence in the country.

In Libya, a spokesman for National Oil Corp said the country's total oil production had risen to 562,000 barrels per day (bpd) from 535,000 bpd at the weekend.

Delegates from three members of the Organization of the Petroleum Exporting Countries (OPEC) said the group was not worried about a slide in oil prices towards $100 a barrel.

Current levels were seen as acceptable while higher seasonal demand in the coming weeks was expected to support the market, the delegates said.

But September U.S. crude rose after falling sharply on Tuesday ahead of the contract's expiry on Wednesday.

U.S. oil climbed 61 cents to $95.09 per barrel, off a session high of $95.44. It fell as much as $2.15 overnight to hit $94.26, its lowest since January. The more-active October contract slipped 7 cents to $92.79.

Brent's premium over the U.S. contract, or West Texas Intermediate, widened to $8.82 on Friday, the biggest since June, following a spike in Brent that proved to be short-lived. The gap returned to similar levels on Tuesday after WTI's slide.

A decline in U.S. crude stockpiles last week also aided WTI. Crude inventories fell by 1.4 million barrels in the week to Aug. 15 to 362.8 million barrels, slightly more than analysts' expectations for a decrease of 1.2 million barrels.

While geopolitical worries have eased, they are far from getting resolved and Le Brun at OptionsXpress said any escalation of tensions in the Middle East "will definitely see risk premiums reapplied to oil prices fairly quickly".

Investors are also eyeing the annual meeting of central bankers in Jackson Hole, Wyoming, that kicks off on Thursday. Federal Reserve chief Janet Yellen speaks on Friday in an address that could give clues on the timing of a U.S. interest rate increase.

Keeping U.S. rates lower for longer in aid of the economy should spur appetite for risky assets including oil.

Morgan Stanley said challenges remain for Brent "given weak crude demand in Europe and Asia combined with excess cargoes in the Atlantic Basin". (Reuters)

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