Home >market >stock-market-news >Oil slips below $112, supply concerns ease

London: Oil dropped below $112 a barrel on Thursday, pressured by signs of a healthier supply outlook and a rise in U.S. jobless claims, offsetting Chinese data signalling stabilization in the economy of the world’s second-largest oil consumer.

US crude inventories rose more than expected last week, a report showed on Wednesday. This weekend Britain’s largest oilfield, Buzzard, is scheduled to restart, increasing supply of crude underpinning the Brent contract.

Brent crude for December delivery was down $1.55 at $111.67 a barrel by 1303 GMT, after settling 78 cents lower. US oil for November fell $1.15 to $90.97.

“Brent is currently under pressure," said Carsten Fritsch, analyst at Commerzbank AG in Frankfurt. “The fact that North Sea supply is due to rebound with the restart of the Buzzard field may also be a factor for the weaker tone of the Brent price."

In a further addition to supplies, Sudan issued a tender to sell Dar Blend crude in November after parliaments in Khartoum and South Sudan ratified an agreement this week to end hostilities and restart southern oil exports.

The market made a further downward lurch after the US jobs report. Initial claims for state unemployment benefits rose 46,000 to a seasonally adjusted 388,000, the Labor Department said on Thursday.

Oil had edged higher earlier in the session. China’s economy grew 7.4% in the third quarter from a year ago, in line with forecasts, while industrial production, retail sales and investment data were all slightly ahead of expectations.

Still, China’s growth rate fell short of the official 7.5% target and an expansion of 7.4% still represents a sharp slowdown for the country, where the economy grew 9.2% in 2011.

“The Chinese data was pretty neutral for the market," said Tony Machacek, an oil futures broker at Jefferies Bache in London. “If support around $113-$112.50 gives way, we could fall quite a bit lower."

Goldman Sachs, in a note to clients on Wednesday, cut its Brent price forecast for 2013 to $110 a barrel from $130, citing an increasing outlook for supply outside of the Organization of the Petroleum Exporting Countries.

The bank, which up until now had the highest oil price prediction among major forecasters, said it still expected the physical market to remain tight and maintained a near-term target of $120.

Supply risks

Brent has gained about 5% this year, partly due to supply-side concerns.

North Sea output has underperformed this year as fields including Nexen’s Buzzard shut for maintenance, supporting Brent. Buzzard, which has missed previous timetables to restart, is currently due to resume output by Sunday.

Iranian exports have fallen due to Western sanctions and the risk of wider supply disruption arising from Iran’s nuclear programme is still putting a floor under the market.

In another sign of Tehran defying international demands to curb its disputed nuclear programme, Western diplomats said Iran was believed to be increasing its uranium enrichment capacity at its Fordow plant buried deep underground.

Concerns about Europe’s debt crisis remain a bearish factor for oil. European leaders are due to discuss banking supervision at a summit on Thursday, but no substantial decisions are expected.

In Greece, workers went on strike for the second time in three weeks over wage and pension cuts. Reuters

Manash Goswami in Singapore contributed to this story.

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