Brent crude slipped below US$108 a barrel on Wednesday, declining for a third day
Brent crude slipped below US$108 a barrel on Wednesday, declining for a third day, after the International Energy Agency (IEA) further cut its demand outlook for the fourth quarter and 2013 amid a rebound in oil exports from sanctions-hit Iran.
The adviser to industrialised nations on energy policy said OPEC-member Iran's exports jumped by a third to 1.3m barrels per day in October from the earlier two months. That added additional pressure on prices already weak as the United States and Europe grapple with their financial woes.
Brent crude dropped to as low as US$107.80 a barrel and traded 11 cents down at US$108.15 by 0457 GMT, after ending 81 cents lower. US oil gained 7 cents to US$85.45, snapping two days of losses.
"There is selling at both ends - one because of a weak demand outlook and, two, because of rising supplies," said Ben Le Brun, a market analyst at OptionsXpress. "The negatives have completely outweighed the positives."
Iranian oil output rose by around 70,000 bpd to 2.7m bpd in October, and exports recovered as China and South Korea bought more oil from the Islamic Republic, the IEA said.
On the demand front, the agency cut estimates for global oil demand for the fourth quarter by around 300,000 bpd from last month's report in the wake of Hurricane Sandy. Global demand is now forecast to grow by 670,000 bpd this year and by 830,000 in 2013 to 90.4m bpd - 100,000 bpd lower than last month.
Oil and broader financial markets have remained under pressure due to a US fiscal policy standoff and uncertainty over the euro zone's debt problems.
US lawmakers gathered in Washington on Tuesday to start talks on a deal to tackle the country's finances.
President Barack Obama wants to extend the individual income tax rates for 98 percent of Americans, but he will not agree to extend them for the top 2 percent of earners. Republicans are opposing any tax increases. The two sides need to reach a deal to avoid the jolt of US$600bn in deficit-reduction measures they all agreed to in August 2011.
"The United States cannot afford not to resolve it, so there might be an 11th hour agreement," said Le Brun. "Till then, there will be a lot of uncertainty and that will weigh on markets."
Over in Europe, Greece's international lenders gave the country more time to fix its budget, though they did not disburse the aid it had hoped to refinance its debt.
"Concerns over the Greek debt situation and US fiscal cliff continue to weigh on global demand prospects," analysts at ANZ said in a report. "Coupled with the IEA suggesting Iran's production and exports had rebounded in October and the market is well supplied, the outlook appears to be bearish."
Prices are also under pressure on expectations US crude oil inventories rose last week as big East Coast refineries were yet to resume normal operations after disruptions caused by Hurricane Sandy, a Reuters poll of analysts showed.
Crude inventories were seen up 1.9m barrels in the weekly data from the federal Energy Information Administration, delayed by a day due to the Veterans Day holiday.
Yet, further decline in prices were capped by concerns of a supply disruption from the Middle East.
Brent has held above US$100 a barrel for most of this year, spiking to US$128 in March, as the United States and Europe imposed tough sanctions to force Iran to halt a controversial nuclear programme. The West says the programme is aimed at building atomic weapons, a claim Iran denies.
Iran unveiled new missile and artillery systems on Tuesday, Iranian media reported, on the second day of large-scale military exercises which officials said were aimed at sending a warning to those threatening the country.