Font Size

- Aa +

Fri 8 Mar 2013 11:18 AM

Font Size

- Aa +

Oil price dips below $110 as OPEC supply rises

Brent crude price down for fourth consecutive week - longest losing streak since May 2012

Oil price dips below $110 as OPEC supply rises
oil, energy, GCC oil, GCC energy, Middle East energy, Middle East oil

Brent crude oil futures fell below $110 a barrel on Friday, pressured by higher-than-expected supply from the North Sea and OPEC, and investors selling out of commodities in favour of equities.

Brent futures fell $1.25 to $109.90 a barrel at 4.17pm UAE time. Brent is down for the fourth consecutive week, its longest weekly losing streak since May 2012.

US oil was down 30 cents to $91.26, after ending more than a $1 higher in the previous session on an unexpected drop in US unemployment benefits.

Traders and analysts pointed to supply fundamentals, with the restart of the Brent pipeline system in the North Sea and higher OPEC shipments expected in March.

The 80,000 barrel-per-day (bpd) Brent oil pipeline system, which forms part of the global benchmark, was shut last Saturday after more oil was found to have leaked into a leg of the 10,000 bpd Cormorant Alpha platform. Flows through the pipeline have now resumed.

"The supply issues have been resolved," said Tony Machacek, a broker at Jefferies Bache in London.

He also cited a higher-than-expected North Sea Forties crude programme for April, with 20 cargoes scheduled to load, up from 368,000 originally planned in March. Forties is one of four key streams that underpin the Brent benchmark.

A forecast for higher oil shipments from the Organisation of the Petroleum Exporting Countries in the four weeks to March 23 is also pressuring oil prices.

Seaborne oil exports from OPEC, excluding Angola and Ecuador, will rise by 420,000 barrels per day (bpd) said British consultancy Oil Movements.

Analysts also pointed to a sell-off across the commodities complex by investors who are seeking higher returns in the equity markets. World shares hit their highest level since June 2008 on Friday, with European equity markets rebounding strongly as investors piled in to the rally.

"The easy money is going into stocks, and commodities are not getting any traction," said Ole Hansen, head of commodity strategy at Saxo Bank. "The dislocation is growing."

Investors have been pulling money from commodity futures and exchange traded products after a run of disappointing price performance across commodities.

Oil prices rose in the first three weeks of the year on expectations of buoyant global economic growth but have given up gains in recent weeks due to concerns that central banks will curtail their policy easing measures.

Oil markets sold off heavily in the second half of February as some of the speculative length came out of the market.

"We have realigned ourselves with the fundamentals around $110 and are in a range of $109-$113 a barrel at the moment," said Hansen. "And until we see a new catalyst that's where we'll be stuck."

The oil market failed to find support from relatively positive Chinese data, with exports for January and February up 23.6 percent, beating expectations for a rise of 17.6 percent.

Analysts look at the combined figures because of distortions caused by the Lunar New Year holidays, which fell in January in 2012 and in February this year.

"There are probably still a few concerns brewing with regard to China," Hansen suggested.

China's February crude oil imports fell nearly 9 percent from a year earlier, but 2012 set a very high base level with imports hitting 5.95 million bpd, the second highest on record.

"The market is not trading on this data," said Carsten Fritsch, an energy analyst at Commerzbank in Frankfurt. "The crude oil imports figure is actually the strongest part of the commodity complex. Imports of copper and soybeans plunged."

Positive growth data from the United States also failed to lift Brent as the US is drawing on ample domestic supplies. Analysts said they would be surprised if a strong US non-farm payrolls figure, due later on Friday, boosted the oil market.

"The trading pattern of the last few weeks has been that good numbers have been ignored and soft numbers have caused price to drop," said Commerzbank's Fritsch.

US non-farm payroll numbers are a key factor in determining the Federal Reserve's policy on quantitative easing. According to a Reuters poll, US jobs may have increased moderately by 160,000 in February, slightly up from January's 157,000.

For all the latest energy and oil news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.