Brent drops below $102 on China concerns
Singapore, August 21, 2014
Brent slipped below $102 a barrel on Thursday, near a 14-month low hit earlier this week, as concerns over excess oil supply and slowing demand weighed on prices.
A survey on China's factory activity showed that growth in the sector slowed to a three-month low in August, adding to concerns about softness in the Chinese economy that could depress oil use in the world's second-largest oil consumer.
"This is a figure which indicates that growth is likely to be reasonably moderate and any upside to current expectations about China will be possibly muted," said Ric Spooner, chief analyst at CMC Markets in Sydney.
"It will be generally a negative for commodities."
Brent crude for October dropped 34 cents to $101.94 a barrel by 0635 GMT after posting a 72 cent gain in the previous session. It touched $101.07 on Tuesday, its lowest since June 26, 2013.
US crude is trading near its lowest since January at $93.13 a barrel, down 32 cents, after the front-month contract shifted to October.
Signs of slowing economic growth across the globe have fuelled concern that there is more oil than the market can absorb.
Brent has fallen more than $10 a barrel since mid-June as investors have become less concerned about supply risks related to Iraq and Libya.
Libya has resumed exports from its largest port while top exporter Saudi Arabia raised its output in July to 10 million barrels per day.
"I don't think we'll see a significant tightening of supply in the near term," Spooner said, adding the trend for Brent was down, with the next support levels at $99.75 and $96.75.
The drop in Brent to near $100 has sparked talk that Opec could consider cutting output to tighten supply, although delegates from the producer group have said higher seasonal demand in coming weeks was expected to support the market.
Prices would have to be lower over a sustained period before Opec would cut output, Spooner said.
In the US, a larger than expected drop in crude inventories last week buoyed West Texas Intermediate and helped the September contract gain $1.59 a barrel on its last day of trade.
"The draw is moderately encouraging but overall inventories are still very large," Spooner said.
Societe Generale analysts said in a note the weekly statistics were moderately bearish for products and that they could drive US refineries to start maintenance early. - Reuters