SINGAPORE — Brent crude futures hovered near $94 a barrel yesterday and were close to their lowest levels in more than two years, reflecting sustained pressure from plentiful global supply and weak demand conditions in Europe and China.
Brent fell the most since 2012 in the past quarter and could struggle to recover amid an oversupplied market that has kept prices below $100 for more than three weeks now.
While a mending United States economy bodes well for a potential rebound in oil prices in the last quarter of the year, sluggish economic signals elsewhere may limit gains.
“Ultimately weak demand conditions in Europe and China mean that aggressive gains are going to be hard to come by,” Australia and New Zealand Banking Group commodity strategist Ankit Pahuja said.
Brent oil for November delivery was little changed at $94,19 a barrel by 3:03am. The contract fell as low as $93,78 on Wednesday, its weakest since June 2012.
US November crude edged up 10c to $90,83 a barrel, but still within striking distance of 16-month lows touched in early September.
US oil got some boost from data on Wednesday showing that US crude inventories unexpectedly fell last week, while a sharp reduction in refinery runs cut petrol stocks to their lowest in nearly two years and pared distillate supplies ahead of winter.
With oil prices largely continuing to slide, the pressure is building up on the Organisation of Petroleum Exporting Countries (Opec) to reduce output during its meeting in November.
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While analysts expect the Opec to adjust the group’s output target of 30 million barrels a day for early 2015, the cut may not be big enough to spur a sharp spike in oil prices.
Opec secretary-general Abdullah al-Badri said in September that he expected the group’s production to drop to about 29,5 million barrels a day in 2015.
“We think there will be some reduction from Opec, but whether it’s as aggressive as some have forecast in the market is still a bit of a question mark,” Pahuja said.
“The challenge is going to be whether Saudi Arabia wants to give up market share to returning supply from Iran and Libya.”
Saudi Arabia on Wednesday announced a bigger than expected cut in its official oil sales price to Asia in November, the clearest sign yet that the world’s top exporter is trying to compete for crude market share and keep oil markets well supplied.
National Australia Bank has cut its average Brent price forecast for 2015 to $103 from $105, saying weaker economic conditions in China, Japan and much of Europe have pushed demand expectations lower despite some optimism in the US, the UK and India.
“Market expectations of oil prices have fallen sharply since June as ample supply and weak demand continue to outweigh concern over geopolitical tensions in the Middle East,” NAB analysts said in a note.
– Reuters
