Oil near $108 as ample supply offsets global unrest
Brent crude oil stabilised around $108 a barrel as ample supply offset geopolitical tensions in the Middle East, Africa and Europe
London: Brent crude oil stabilised around $108 a barrel on Tuesday as ample supply offset geopolitical tensions in the Middle East, Africa and Europe.
Despite conflicts in Ukraine, Iraq and Libya, global oil production has exceeded demand, leaving pockets of excess supply in Africa and Europe.
“The likelihood of a supply disruption remains extremely low as the ability of other regions to respond, particularly the US energy sector, remains high," analysts at Goldman Sachs led by Jeffrey Currie said in a note to clients.
Brent crude was up 15 cents at $107.72 a barrel by 1:30pm, off an intraday low of $107.37, after dropping nearly 0.8% in the previous session.
US crude dropped 15 cents to $101.52 a barrel, near a 1-1/2-week trough of $100.90 hit on Monday.
Crude exports from Opec’s second largest producer Iraq stayed near record levels as oil production in the south remained untouched by a conflict with Islamist militants.
Olivier Jakob, analyst at Petromatrix in Zug, Switzerland, said West African physical crude markets were over supplied.
“There are still a lot of cargoes from West Africa looking for a home," Jakob said. “But from the support side there is a lot of geopolitical input."
In Libya, oil production fell to around 450,000 barrels per day (bpd) last week with escalating violence threatening a hard-won deal to restore oil exports.
Libya’s capital Tripoli has slipped into chaos, but analysts said the Opec producer’s low output, at way below 1 million barrels per day for close to two years, has already been factored into oil prices.
In Europe, US and European leaders agreed on Monday to impose wider sanctions on Russia’s financial, defence and energy sectors although these were not expected to impact Russian oil exports.
The EU will try to reach a final deal on Tuesday on stronger sanctions that would include restrictions on energy technology.
A firm dollar also kept a lid on oil by making the commodity expensive for holders of other currencies.
The dollar held close to a six-month peak against a basket of major currencies on Tuesday, ahead of this week’s policy review by the US federal reserve.
In the US, traders eyed gasoline inventories which have weighed on US crude prices.
A preliminary Reuters survey showed US gasoline stocks could have risen by 1 million barrels last week, adding to bloated supplies. US commercial crude oil inventories likely dropped in the week to 25 July, the survey showed. Reuters
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