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Oil slips to $105 on weak demand

By on August 2, 2014

Brent crude oil slips to $105 a barrel on Friday, as oversupply and low demand outweighed worries over political tensions in the Middle East, North Africa and Ukraine.

Brent crude was $105.10, its weakest since July 15 and was down 80 cents at $105.22 a barrel.

US crude futures fell 85 cents to $97.32 a barrel, following 6.8 per cent decline last month, the biggest monthly loss since May 2012.

US crude slipped more than a dollar to an intraday low of $97.09 earlier in the session, its lowest since February, after the closure of a refinery in Kansas.

The outage at Coffeyville refinery, a major crude consumer, could last up to four weeks, according to its operator.

Analysts say they expect global oil production to exceed demand this year and a supply glut has already built up in the West African and European markets.

Worries over geopolitical risks to oil supply have eased despite escalating violence in parts of the Middle East and North Africa.

“A stronger dollar and concerns about stalling oil demand especially from China have been the bear factors at work, eroding prices,” said David Hufton, Managing Director of brokerage PVM Oil Associates.

Oil prices remained steady as US job growth slowed more than expected in July.

Non-farm payrolls increased 209,000 last month, less than expected, after surging by 298,000 in June, the Labor Department said on Friday.

The front of the Brent futures price curve is trading at a heavy discount to later barrels in a formation known as a contango.

This discount has now lasted longer than any since early 2011, Morgan Stanley analyst Adam Longson said.

Oil investors say they are less worried now than a month ago about the risk to oil supplies from conflicts and civil turmoil despite heavy fighting in many countries.

OPEC’s second largest producer, Iraq, is battling an Islamic insurgency in the north and west.

The conflict threatens to split the country, but has yet to have an impact on near-record oil exports from the south.

Baghdad is also embroiled in a dispute with Iraqi Kurdistan over oil exports via Turkey.

In Libya, oil output remains around 500,000 barrels per day, down from one million bpd in 2012, following weeks of clashes between rival militias.

Energy investments in Russia also faced delays after sanctions imposed by the United States and European Union limited access to funds.

 

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