Brent oil briefly strikes two-month low

17th January 2014, Comments 0 comments

Brent crude prices hit a two-month low Friday on oversupply concerns, but the oil market was set to finish the week on a stable note, dealers said.

In early morning deals, Brent North Sea crude for March delivery slid to $105.44 a barrel. It later stood at $106.30, up 55 cents from Thursday.

New York's main contract, West Texas Intermediate (WTI) for delivery in February added 69 cents to $94.65 a barrel.

The prospect of more supplies from Libya and Iran has weighed on sentiment this week.

"Brent is continuing its downswing of recent days and is trading this morning at a two-month low," said Commerzbank analysts, adding it was also weighed down by the expiry of the February contract on Thursday.

"The expectation that supply from Libya and Iran could soon return to the market should initially continue to put selling pressure on Brent."

At the same time, however, various upbeat global economic data releases have stoked hopes of strengthening global energy demand.

Oil sank Monday on news that a landmark deal with world powers to curb parts of Iran's disputed nuclear programme, in exchange for sanctions relief, will take effect from January 20.

Adding to downward pressure, Libya is widely expected to continue to recover lost production.

"Brent has traded sideways this week ... torn between positive global economic data and an improving supply outlook from Northern Africa and the Middle East," added Inenco analyst Lucy Sidebotham.

"A final deal between Iran and the world powers isn't expected until February."

Added to the supply picture, the United States is also expected to ramp up production this year.

Meanwhile on Thursday, oil cartel OPEC nudged up its world oil demand growth forecasts for 2013 and 2014, citing positive developments in Europe and North America.

For 2013, the 12-member Organization of Petroleum Exporting Countries estimated demand at 89.86 million barrels per day (mbd), up 0.94 mbd from demand in 2012.

In its previous monthly report in December, growth had been forecast at 0.87 mbd.

The revision was helped by the US economic recovery and hikes in industrial and transportation fuel consumption there, OPEC said in its monthly report. Oil demand also started picking up in Europe at the end of 2013.

OPEC added that demand for its oil was expected to fall in 2014 as the supply from non-members increased by an estimated 1.27 million bpd over 2013 to an average of 55.38 billion bpd.

Non-OPEC supply growth was revised higher and mainly came from the United States and Canada.

"In 2014, the market will be caught in the crossfire of strong growth in US oil supply on the one hand and supply risk allied to OPEC supply management on the other," concluded BNP Paribas analysts in a research note.

"This is likely to result in another year of sideways movement in prices."

© 2014 AFP

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