Oil market dips before key US data

3rd October 2014, Comments 0 comments

The oil market slid on Friday before the latest US jobs report, one day after hitting major lows in response to key exporter Saudi Arabia cutting its prices.

Brent North Sea crude for delivery in November declined 16 cents to stand at $93.26 a barrel in midday deals in London.

US benchmark West Texas Intermediate for November nudged six cents lower to $90.95 per barrel.

"Today, the main focus will turn to the release of the US non-farm payrolls data for a confirmation of the US employment conditions," said senior analyst Myrto Sokou at the Sucden brokerage in London.

US jobs figures are closely watched by crude investors for clues on the state of economic recovery and demand in the world's top oil consumer.

Singapore's United Overseas Bank (UOB) said investors are keenly eyeing the September US jobs report.

"For the September non-farm payrolls, markets are looking at a job creation of 215,000, up from 142,000 in August, while unemployment is expected to stay unchanged at 6.1 percent," UOB said.

- Saudi news rocks market -

Price cuts by Saudi Arabia sent the oil market plunging on Thursday to the lowest point in more than two years.

Analysts say the move by Saudi Arabia, OPEC's biggest producer, signals its focus on maintaining market share amid a broader increase in production by rivals.

In reaction, Brent oil slumped to $91.55 a barrel, which was last witnessed in June 2012, and New York crude dived to $88.18 -- a level last seen in April 2013.

The market was also weighed down by the strength of the dollar and concerns about a glut of global supplies, which have overshadowed ongoing geopolitical jitters in key oil-producing regions.

"Despite unresolved geopolitical tensions in Russia, Iraq and Syria, Brent prices have steadily declined over the last two months, as the combination of strong North American production growth, weak global demand growth and lower OPEC disruptions led to a build in petroleum inventories," wrote Goldman Sachs analysts in a market report.

"In particular, Libyan production has ramped up quickly; and albeit unstable and potentially unsustainable, it has reached 925,000 barrels per day."

In the third quarter of 2014, both Brent and New York oil prices have shed approximately 15 percent of their value, hit by the weak outlook for global energy demand.

- Supply concerns before OPEC -

"Global concern over declining economic growth and waning demand combined with a robust supply continue to weigh on the global oil market," added Inenco analyst Dorian Lucas.

"Current ambivalence between OPEC members regarding the necessity of a supply cut will continue to remain under scrutiny leading up to the group's next meeting in November.

"Many OPEC members are calling for a revised output target going forward in an attempt to stabilise prices,

"However core gulf members remain defiant in the belief that winter demand will see a revival in the market."

The Organization of the Petroleum Exporting Countries (OPEC), which pumps a third of global crude, will hold its next output gathering on November 27 in Vienna, which is home to the oil producers' cartel.

Back in June, OPEC agreed to keep production at 30 million barrels a day, saying in a statement that while oil demand was picking up, downside risks to the global economy remain unchecked.

© 2014 AFP

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