An easing of tensions in the Middle East region and the rising US crude inventories have helped push down crude prices in Kuwait to 5-month lows, said a report.

Oil prices have eased back through October and early November, with some benchmarks reaching 5-month lows.

The price of Kuwait Export Crude slipped from $107 barrel per day in mid-October to $101 in the first week of November, its lowest since early July, stated the National Bank of Kuwait (NBK) in its report.

Brent crude prices followed a similar pattern, falling from $112 in early October to under $103 – some $14 below its end-August peak, it added.

The price of the main US benchmark – West Texas Intermediate (WTI) – witnessed larger declines, falling by more than $16 from its early September peak of $111. WTI prices fell below $100 bpd for the first time in more than 3 months.

Accordingly, WTI’s discount to Brent widened from $1 in mid-July to as high as $12 in late October.

An easing of tensions in the Middle East has contributed to recent price declines. Negotiations between the West and Iran surrounding the latter’s nuclear program have reduced the political factors that have elevated oil prices this year, said the NBK report.

This follows the US backing-off from military intervention in Syria in the previous month. Western sanctions have taken an estimated 1 million barrels per day (mbpd) of Iranian crude off the oil market, and oil prices have reacted to the prospects of an easing of these sanctions.

Rising crude inventories in the US have also added to downward pressure on prices, it added.

Weakening demand from US refineries – due to seasonal maintenance – and rising US oil production have led to a rapid climb in crude stockpiles. This also explains why WTI prices have fallen more sharply than other benchmark crudes in recent weeks.

Strong global oil supplies have also helped maintain downward pressure on prices. Non-Opec supplies have continued to surge, while elevated production levels in the GCC have partly offset supply disruptions in other Opec countries.

Opec members, scheduled to meet in Vienna on December 4, are expected to keep the organization’s output target at 30 mbpd – slightly below the current production level, said the report.

Analysts’ forecasts for global oil demand growth this year have converged over the past month towards a slightly improved outlook, with a marginal acceleration in 2014.

The International Energy Agency (IEA) now sees demand growing by 1 million barrels per day (mbpd), or 1.1 per cent, this year from 0.9 mbpd (one per cent) last month – in line with the forecasts of the Center for Global Energy Studies, it stated.

Non-Opec oil supplies are projected to increase by a significant 1.5 m bpd for 2013 as a whole, of which one-quarter is due to come from Opec natural gas liquids, according to NBK.

Non-Opec supply growth has come from North America, the former Soviet Union and Africa – the latter related to the ramp-up of output from South Sudan.

Despite an improving demand outlook in 2014, large increases in non-Opec output could cause supply to exceed demand again, forcing  Opec to cut production in order to keep prices above $100 bpd, stated the report.

NBK said although oil prices may average lower than last year’s $107, higher production is expected to keep government revenues flat or slightly above the previous year.

"If government spending, as expected, comes in 5-10 per cent below its official target of KD21 billion, the budget would see a surplus of between KD12 billion and KD13.6 billion before allocations to the RFFG. This would equate to 24 to 27 per cent of forecast 2013 GDP, and would represent Kuwait’s 15th consecutive budget surplus," it added.-TradeArabia News Service