BackBrent holds above $106 as Libya, Iraq violence renews supply worries
Brent crude was down 2 cents at $106.64 on Monday after initially falling to $106.27 earlier in the session
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Singapore: Brent crude held steady above $106 a barrel on Monday, hovering just off three-month lows, as the potential for renewed supply disruptions put a floor under prices that have been tumbling since the last week of June.
Brent lost $2.01 on Friday to settle at $106.66 a barrel, the lowest finish since 7 April. The benchmark lost about 3.6% last week, the steepest weekly fall since early January.
But the market could see a strong rebound this week amid new and continuing violence in Libya and Iraq, and worries that a final deal may not be reached between Tehran and world powers.
“I’ve been a bear on oil. I still feel bearish but I feel it’s gone too far," said Jonathan Barratt, chief executive of Sydney commodity research firm Barratt Bulletin.
The uncertainty over a deal with Iran on its nuclear programme, renewed fighting in Libya on Sunday, weekend bomb attacks near the Iraq capital Baghdad, and continuing tensions in Ukraine created a “whole basket of worry", Barratt said.
“It’s the complete picture [in the Middle East}. We all know how anything can flare up," he said.
Brent crude was down 2 cents at $106.64 by 11.24am on Monday after initially falling to $106.27 earlier in the session.
US crude futures fell 38 cents to $100.45, adding to Friday’s slide. The US benchmark lost $2.10 in the previous session to close at $100.83 a barrel, its lowest settlement since 12 May.
“To me the oil markets have overshot. Investors didn’t expect it to fall to that level," said Yusuke Seta, a commodity sales manager at Tokyo’s Newedge Japan.
“The potential for supply disruptions in Libya and Iraq is supporting Brent," Seta said, “even as output is either growing or being maintained at current levels."
“The Iraq issue should drag on for a while, which will support Brent," Seta said.
Brent is likely to be trading around $107.50-$108 a barrel by Friday, Seta said. “I don’t expect US crude to break below $100 a barrel," he added.
“The market is also focused on the status of Libyan oil supplies," Barratt said. “The return of Libyan barrels to market was one of the main factors that had driven prices lower."
While Libya’s oil output had risen to 470,000 barrels a day, the eastern port of Brega remained closed because of protest by oil security guards, a spokesman for the state-run National Oil Corp said on Sunday.
Heavy fighting also broke out between rival militias vying for control of Libya’s main airport on Sunday, killing at least seven people and halting all flights in the worst fighting in the capital for six months.
The violence led the United Nations to move some staff out of the Opec producer, and the UN said on Sunday all international staff could be relocated if the fighting escalated.
“With the 20 July deadline looming for a deal on Iran’s nuclear programme and six world powers, major differences persist over an agreement," US Secretary of State John Kerry said on Sunday.
Iranian deputy foreign minister Abbas Araqchi said that if talks collapsed, Iran would resume high-level uranium enrichment. Such a move would likely lead to a return of the sanctions against Tehran that had earlier crippled its oil dependent economy.
Six people were killed on bomb attacks on the outskirts of Baghdad on Sunday after Iraq’s parliament delayed until Tuesday a decision on the formation of a new government to tackle an Islamist-led insurgency raging less than 80 km from Baghdad.
Amid the turmoil further south, the Kurdish Regional Government has been pushing to expand its power in northern Iraq, and over the weekend Kurdish forces seized two oilfields and took over operations from a state-run oil company. Reuters
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