A Review of the Nigerian Energy Industry

Brent rises above $107

Brent crude oil25 October 2013, News Wires – Brent futures rose above $107 a barrel on Friday, on expectations demand in top consumers China and the US will recover, but easing supply concerns from the Middle East kept the gains in check.
China’s factory output expanded at its fastest pace in seven months in October as policymakers in the Asian powerhouse sought to ensure a steady, broad-based recovery. In the US, while overall manufacturing fell last month, investors expect oil demand to recover as peak winter demand sets in.

Brent crude gained 23 cents to $107.22 a barrel early on Friday, but is still poised to post its biggest weekly decline in a month. US oil rose 32 cents to $97.43, but is set for its steepest weekly loss since June.

“We are looking for a bottom as far as oil prices are concerned,” said Tony Nunan, a Tokyo-based risk manager at Mitsubishi. “We are at a trough in oil demand, and as we head into winter, demand will recover.”

The contraction in US factory output in October for the first time since late-2009, along with the euro zone losing momentum, may pressure oil, but prices are unlikely to fall much further as the demand outlook improves.

Nunan expects Brent futures to bottom out at $106 a barrel, and both the benchmarks will recover once refineries in the United States come back online from maintenance, he said.

The recent weakening in prices, with Brent sliding $10 a barrel from a high above $117 touched in August, will help improve profits from processing a barrel of crude into products, tempting refiners to ramp up just as winter demand for fuels picks up, he said.

Brent may rebound to $107.65, while US oil may pull back to $98.15 before falling again towards $94.82, according to Reuters technical analyst Wang Tao.

Continued progress in talks between Iran and the West over Tehran’s controversial nuclear programme helped cap further gains in prices.

The White House hosted a meeting of aides to Senate committee leaders on Thursday seeking to persuade lawmakers to hold off on a package of tough new sanctions against Iran.

The White House will press for another delay on a sanctions bill that had been expected to come to a vote in the Senate Banking Committee last month but was held back after appeals from President Barack Obama’s administration to let negotiations on Iran’s nuclear programme get under way.

“The progress of talks may not yield an immediate agreement or a deal on the nuclear issue, but will put a moratorium on further sanctions against Iran,” Nunan said. “That may mean less oversight, and more Iranian oil leaking into the market.”

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