Oil slips below $106 on growth concerns
London, February 4, 2014
Oil edged below $106 a barrel on Tuesday, weighed down by concerns that weak data from the US and China, the world's largest consumers of oil, could slow global growth though a spate of supply problems offered some support.
A production glitch at the North Sea Buzzard oilfield and a brief dip in Libyan supplies due to bad weather helped underpin Brent crude oil, which has been hit in recent sessions by a rout in emerging markets and stocks.
Brent, the international benchmark, was down 32 cents to $105.72 a barrel by 1124 GMT after two sessions of losses.
U.S. crude futures, known as WTI, were up 19 cents to $96.62 per barrel following its largest daily percentage loss in nearly a month as it tumbled with U.S. equities.
"The pressure is still on the downside for Brent. There is still concern about growth in emerging markets. The numbers coming out of the U.S. yesterday caused concern," said Michael Hewson, analyst at CMC Markets.
Signs of slowing economic growth in the United States and China raised concerns about fuel demand while forecasts of excess supply this year weighed on oil prices.
The U.S. economy has lost steam as manufacturing activity slowed sharply in January on the back of the biggest drop in new orders in 33 years, while construction spending barely rose in December, while factory activity reports have raised concerns about growth in China.
But while the sell-off in stocks continued apace on Tuesday, Brent looks more stable.
"On Friday and Monday, we had steep falls linked to weak stock markets but it is significant that Brent has not continued to go down the same way and remains in yesterday's range," Christopher Bellew, a broker at Jefferies Bache said.
"That's because for oil, unlike stocks, there is also concern about supply in the Middle East and elsewhere and that underpins it as, to some extent, does cold weather in the United States."
Oil gained some support from tighter supply in the North Sea as the Buzzard oilfield, the largest field that contributes to Forties, has suffered a new production glitch.
Bad weather also reduced output from Libya on Monday but the National Oil Corporation said loading had restarted and production would return to normal on Tuesday.
"We're waiting for U.S. jobs data this week but investors are increasingly nervous and that would tend to have a downward effect on Brent, especially as it is trading at such a premium to WTI," Hewson said.
The spread between Brent and WTI, hotly traded last year, was hovering around the $9 mark on Tuesday.
It fell to $8.06 on Monday, its narrowest level since Oct. 18, after news that oil stocks at the U.S. storage hub in Cushing, Oklahoma, were expected to have dropped by more than one million barrels for the first time in five months.
WTI has largely been landlocked for the last three years and has traded at a steep discount to Brent - as wide as $19 as recently as November.
But the spread has incrementally narrowed from $15 at the start of this year as traders anticipated a new pipeline coming online would relieve the glut of oil pooled at Cushing. The 700,000 barrels-per-day line was expected to drain oil from Cushing to U.S. Gulf Coast refineries. – Reuters