Brent crude held steady below $108 a barrel this morning, after pulling back from a three-month peak the session before as the prospect of more supply from non-OPEC producers and concerns about China’s demand growth capped gains.
Investors also netted profitsyesterday after a three-week rally on political uncertainty in Egypt, falling US crude inventories and a weaker US dollar pushed Brent and WTI crude futures to multi-month highs.
But non-OPEC supply is set to grow at the fastest pace in decades next year, the International Energy Agency (IEA) said yesterday, and China's weaker appetite for commodities continues to drag on prices.
“We are seeing some concern that the upward momentum has reversed with last night’s fall,” said Michael McCarthy, chief market strategist at CMC Global Markets in Sydney.
Brent crude for August delivery had edged down 4 cents to $107.69 a barrel by 0614 GMT, after touching a low of $107.28. Brent was nearly flat for the week after rising in the previous two weeks.
US crude was down 14 cents at $104.77, but still on track for a third weekly rise. It fell the most in nearly three weeks yesterday after hitting a 16-month high at $107.45, as fears of a supply squeeze at the contract’s delivery point in Cushing, Oklahoma, eased.
“It’s a flash of short-term trading interests. Fundamentals are still supportive,” Mr McCarthy said, referring to steady economic recovery in the United States and US oil inventories.
US data on Wednesday showed the biggest two-week drop on record in crude stockpiles, while refinery production hit a five-year high.
Elsewhere, China’s finance minister, said he expects growth in the world’s second-largest economy to come in at 7 per cent this year, the official Xinhua news agency said this morning, below the government’s official forecast.
That came after warnings from China earlier this week of a “grim” outlook for trade after a surprise fall in June exports, raising concerns that the second biggest oil consumer would no longer be the buoyant force for oil it has been for the last decade.
With the IEA also saying additional non-OPEC supply including from the North American shale oil boom will meet strong global demand next year and erode the market share of OPEC countries, Barclays cut its 2014 Brent oil forecast by $20 a barrel.
Reuters
