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Oil slips towards $102 on ample supply

Thursday, August 28 09:52:17

Brent crude oil fell towards $102 a barrel on Thursday, depressed by ample supply and lackluster demand as global economic growth remains tepid.

Oil supply is expected to exceed demand this year, analysts forecast, and crude oil benchmarks on both sides of the Atlantic Basin are on track to post a second monthly decline.

"It looks like there is crude everywhere," said Tony Nunan, a risk manager at Mitsubishi Corp. "There's just too much supply and we've had terrible demand."

ABN AMRO Bank senior energy economist Hans van Cleef agreed, saying oil for delivery in the near term was "down as a result of weak demand and oversupply":

"The market should price in lower oil prices in the near term," van Cleef said.

October Brent crude was down 25 cents at $102.47 a barrel by 0800 GMT. Last week, the contract hit a 14-month intraday low of $101.07 and it has been unable this week to break out of the $102-$103 range.

U.S. crude slipped after news of the fire at BP's largest refinery in the United States. The October contract was last down 40 cents at $93.48 a barrel.

BP Plc said on Thursday its refinery at Whiting, Indiana, was still operating following a blaze the night before that had minimal impact on production.

OECD oil inventories rose sharply in the second quarter, while tit-for-tat sanctions between the European Union and Russia have curbed growth in Europe, Nunan said.

Oil futures were little changed in the previous session following a neutral inventories report from the United States, while investors looked ahead to economic data to gauge the outlook for demand in the world's largest oil consumer.

U.S. crude stocks fell 2.1 million barrels last week, more than expected as refineries processed more, but inventories at the Cushing, Oklahoma hub rose 508,000 barrels, data from the Energy Information Administration showed on Wednesday.

Political instability in Iraq and Libya continued to weigh on investors' minds even though oil exports from the two countries have actually risen in recent months.

Analysts have warned that a comeback by Libya's oil industry may be short-lived as armed groups and two parliaments fight for control of the North African country.

An Islamist insurgency in Iraq threatens to derail long-term oil output plans set by OPEC's second largest producer. (Reuters)

For more visit: www.businessworld.ie