Oil market drops before US inventories report

24th September 2014, Comments 0 comments

Oil prices slid Wednesday as traders awaited the US crude inventories report and digested weak global economic data and the return of Libyan production to an already well-stocked market.

Brent North Sea crude for delivery in November reversed 30 cents to stand at $96.55 a barrel in midday deals in London.

US benchmark West Texas Intermediate for November handed back 13 cents to $91.43 per barrel.

"Brent futures extended losses as disappointing economic indicators from the US and eurozone raised renewed concerns regarding a slowdown of economic growth and weaker than expected oil demand in the short-term," said senior analyst Myrto Sokou at the Sucden brokerage on Wednesday.

"Investors remain cautious as high crude oil inventories seem to offset any geopolitical risk in Middle East following the persistent tensions in Syria."

She added that US house price numbers and manufacturing survey data had both missed expectations on Tuesday, stoking worries over energy demand.

The oil market was mixed Tuesday as traders also mulled poor eurozone business activity against better-than-expected Chinese manufacturing figures.

Sentiment was meanwhile hit Wednesday by news that Germany's Ifo business confidence indicator fell in September.

Traders will later switch focus to the US government's snapshot of American energy inventories for the week ending September 19, for clues about demand in the world's top crude consumer.

Crude reserves are expected to have risen by 500,000 barrels on average in the week to September 19, according to analysts polled by the Wall Street Journal.

Gasoline stockpiles are expected to fall by 200,000 barrels, while stocks of distillates, which include heating oil and diesel, are expected to rise by 300,000.

Prices won partial support this week from news that US-led forces had started targeting jihadist militants in crude producer Syria.

"The support (for oil prices) was offered by the US and its Middle Eastern allies launching a series of airstrikes against Islamic State targets in Syria," said Capital Spreads dealer Jonathan Sudaria.

"It fuelled speculation that oil supplies from the regions could be disrupted."

- 'Ample supplies, downward pressure' -

However, Singapore's United Overseas Bank cautioned that the restarting of production in Libya's biggest oilfield "added to oversupply woes in a flush market".

Production at Sharara, Libya's largest oilfield, restarted Monday after its closure last week, the Wall Street Journal reported.

The 340,000 barrels-per-day capacity Sharara field was shut last week due to intense fighting near the vicinity of the export terminal and refinery linked to it.

The country remains in turmoil due to fighting between militias.

A Libyan government spokesman on September 11 said the North African state expects production to reach 1.5 million barrels per day by year-end from more than 700,000 barrels currently.

"Ample supplies, combined with a perceived slowing of global economies, (are) continuing to provide downward pressure" on prices, said Inenco analyst Dorian Lucas.

"Supply has been further bolstered as Libya's output has rebounded back to 800,000 bpd following the restart of production at its Sharara oil field."

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© 2014 AFP

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