Brent crosses $114 on opposition to US plan
Singapore, August 20, 2012
Brent crude inched up on Monday to more than $114 a barrel as the US plan to release strategic petroleum reserves faced stiff resistance, but hopes for a revival in North Sea crude output kept a lid on gains.
Oil prices slipped last week after a source said the White House was 'dusting off' plans for potentially tapping the Strategic Petroleum Reserve to prevent high energy costs from undermining the success of sanctions against Iran.
Japan and South Korea, as well as the head of the International Energy Agency (IEA), the energy watchdog of the West, said on Friday there was no reason to release U.S. reserves to arrest the rise in gasoline prices.
Brent crude for October rose 55 cents to $114.26 a barrel by 0636 GMT after falling more than $2 on Friday on expectations the U.S. might release some of its reserves. U.S. oil added 48 cents to $96.49.
Brent has risen about a third in less than two months from the year's low of $88.49, boosted by supply concerns after a dispute between Iran and the West over the Middle Eastern country's nuclear programme.
'The market may have reason to believe that it was scare-mongering, especially if the IEA is suggesting it won't be supportive of the release of reserves,' said Natalie Robertson, an analyst at ANZ in Sydney.
'Brent has been supported by the ongoing disruption in North Sea supplies, but they are expected to ease in the coming months, which could dampen prices.'
US officials are collecting information about potential needs and studying futures, production numbers and data on Iranian oil exports, the source said on Thursday.
A day later, Maria van der Hoeven, executive director of the IEA, said there was no reason for a release, adding that the market was sufficiently supplied.
She said she had not discussed a potential release with members of the Paris-based IEA, which is charged with coordinating use of consumer nations' strategic inventories.
Britain and France appeared open to discussing the possibility, but officials in Japan and South Korea said on Friday they saw no cause for action, adding that stock releases were usually considered during supply shortages, and not prompted by price gains.
Adding to worries were incidents of unrest in the Middle East, specifically in Libya where a car bomb killed two people on Sunday and an attack on a mosque in Yemen which killed seven.
Brent crude has also been supported in recent weeks by expectations of shrinking North Sea production, which will fall about 17 percent in September from August, as the key Buzzard field will be offline for maintenance.
Buzzard is Britain's largest oilfield and is suspending output until about mid-October. Buzzard is the single biggest contributor to the Forties stream, which in turn is the largest of four crude flows that set the price for Brent.
Still, this shortfall is viewed as a temporary glitch, with traders expecting the pressure to ease in coming months when the maintenance is completed.
'Tightness in the North Sea should ease after maintenance at the Buzzard field is completed after September,' Morgan Stanley analysts led by Hussein Allidina said in a note on Monday.
'Increased supply from the Forties stream, planned refinery maintenance in the Atlantic Basin and a potential return of Sudanese and South Sudanese supply portend to a more comfortable fourth quarter of 2012 crude balance.'
Prices are expected to remain range-bound this week, given the shortage of economic data releases at this time of the month, added ANZ's Robertson.
Traders are still looking to the minutes of last Federal Open Market Committee's July 31-Aug 1 meeting this week, which may provide cues on the US Federal Reserve's view on further policy easing.
Demand for crude oil has remained sluggish because of the global economic slowdown, but with Europe and the US heading towards winter, low gasoil inventories may provide fundamental support to crude, Deutsche Bank analysts said in a weekly note.-Reuters