A Review of the Nigerian Energy Industry

Brent slips below $103

Brent oil prices06 June 2013, News Wires – Brent futures slipped below $103 a barrel on Thursday amid persistent worries that the US Federal Reserve may roll back its stimulus, although a surprise fall in crude stockpiles in the world’s top oil consumer helped stem the slide.

Riskier assets weakened across the board, including equities and base metals, as investors remained nervous ahead of a key US jobs report due on Friday that will be scoured for indications on the health of the world’s largest economy and what this means for the Fed’s policy.

Brent slipped 9 cents to $102.95 a barrel early on Thursday, slipping for a second straight day. US oil gained 10 cents to $93.84, after ending 43 cents higher.

“One the one hand, we saw a substantial drop in US crude inventories,” said Victor Shum, vice president of energy consultancy IHS Energy Insight. “But a major pullback in US equity markets because of worries over the Fed’s stimulus countered the bullishness of the inventory data. Therefore, oil is in a holding pattern.”

A weak global demand growth outlook and ample supplies will weigh on oil as fundamentals for the market are weak, Shum said.

But a firm dollar and worries that a geopolitical crisis in the Middle East may worsen will cushion oil prices.

The dollar gained almost 2% in May against a basket of currencies. A strong dollar weighs on commodities priced in the greenback by making them expensive for holders of other currencies.

The US said on Wednesday it was “deeply troubled” by Iran’s plans to start a reactor in 2014 that could yield nuclear bomb material, highlighting concerns about the heavy water reactor Tehran is building near the town of Arak.

Tough Western sanctions have already driven Iran’s crude exports to the lowest in decades in May, and Washington may toughen measures aimed at squeezing oil sales further.

The US has renewed six-month waivers on sanctions for China, India and seven others as they agreed to cut purchases of oil from Iran.

Oil prices may also draw support from a more-than-expected fall in US crude stockpiles.

US crude inventories shrank as imports tumbled while gasoline stocks along the East Coast fell, data from the US Energy Information Administration showed.

Stockpiles of crude declined by nearly 6.3 million barrels last week, led by a 2.5 drawdown on the Gulf Coast for the week to 31 May, according to the EIA data. Analysts polled by Reuters had forecast a much smaller 400,000 barrel decline.

“Good refining margins present an incentive to run refinery capacity, but current utilisation levels are nonetheless only at the five-year average for this time of year,” analysts at BNP Paribas said in a note.

Brent is expected to test support at $102.49, with a good chance of breaking below this level and falling more to $101.82, while US oil has completed a rebound from the Monday low of $91.26 and is expected to revisit this level, according to Reuters technical analyst Wang Tao.

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