Oil near 3-month low as supply fears ease
London, July 14, 2014
Brent crude oil steadied around $107 a barrel on Monday, close to its lowest in three months after weeks of heavy falls on signs of improving supply from key producers and continued weak demand.
The North Sea benchmark peaked above $115 last month as an Islamist insurgency swept across western Iraq, taking control of large parts of the oil-producing country including its biggest refinery.
The insurgency now holds large swathes of Iraq but is hundreds of kilometres from the country's main oil-producing and exporting centres in the south and the fighting has had little impact on oil supplies.
Meanwhile, oil output in Libya has increased in the last few weeks and extra supplies of its high-quality, light crude are expected to start flowing to markets soon, traders say.
"The key drivers now are the possible return of significant flows from Libya, as well as weak physical markets," said Michael Wittner, oil analyst at French bank Societe Generale.
Brent crude was up 30 cents at $106.96 by 1345 GMT after dropping to $106.21, its lowest since April.
US crude futures fell 30 cents to $100.53 a barrel. The US benchmark lost $2.10 on Friday to close at $100.83, its lowest settlement since May 12.
"We had a steep sell off on Friday and it was a very high volume which probably shows that there was a lot of liquidation by people who bought higher up," said Christopher Bellew, a broker at Jefferies Bache in London.
Global crude oil markets are fairly well supplied, traders and analysts say, and profit margins for refiners in several regions have fallen sharply, reducing demand for crude.
This weakness has been reflected in the price structure of the Brent futures market, as contracts for prompt oil have fallen to significant discounts below later contracts.
"Crude demand is soft, because product demand is weak, which is reflected in mediocre refining margins in Europe and Asia, and some erosion in the United States," Wittner said.
Fighting broke out between rival militias vying for control of Libya's main airport on Sunday, killing at least seven people and halting all flights in the worst violence in the capital for six months.
But Libya's oil output has continued to rise and has now reached 470,000 barrels per day (bpd), a spokesman for the state-run National Oil Corp said.
Libya has an oil production capacity of well over 1 million bpd and could increase output significantly if the government establishes control over key facilities.
But the possibility of further export disruption in Libya as well as the continuing uncertainty of nuclear talks with Iran could push up oil prices, said Bellew.
Investors kept an eye on talks between Iran and the big world powers over Tehran's nuclear programme.
Iran's oil supplies have been restricted by sanctions for several years and agreement at the talks in Vienna could lead to a softening or lifting of those limits.
Negotiators have been set a July 20 deadline for a deal but diplomats say the two sides are deeply divided and assume the talks will be given another six months to seek a deal. - Reuters