Brent slips towards $109

Brent crude12 December 2013, News Wires – Brent futures slid toward $109 a barrel on Thursday as a looming US budget deal backed expectations the Federal Reserve may act soon to unwind a stimulus programme that has supported oil prices.

Oil fell along with most other commodities, while Asian shares fell to a four-week low, after Republicans in the US House of Representatives were seen backing a two-year budget deal negotiated behind closed doors.

“Passing of the budget would give the Fed one last reason to exit the stimulus programme. Expectations are creating a weaker sentiment for oil and other commodities,” said Chee Tat Tan, investment analyst at Phillip Futures in Singapore.

Brent crude oil fell as much as 21 cents to $109.49 a barrel and was down 19 cents at $109.51 early on Thursday, after settling 32 cents higher. US crude futures for January delivery were 3 cents lower at $97.41.

A vote on a tentative budget agreement is likely to be held this week. A deal would remove fiscal uncertainty ahead of next week’s much-anticipated Federal Reserve meeting.

The US contract had closed $1.07 lower on Wednesday, as investors viewed a steep decline in US crude stockpiles as a move by refiners to avoid taxes instead of a sign of strong demand.

US crude inventories fell 10.6 million barrels last week to 375 million barrels, according to the Energy Information Administration, much more than a forecast of a 3 million barrel fall from analysts polled by Reuters.

Also weighing on prices was a sharp rise in US gasoline inventories, signalling weak domestic demand ahead of the holiday season.

“This is a concern because crude production in the United States is rising. All put together we see a bearish picture,” said Tan of Phillip Futures.

Nevertheless, the International Energy Agency (IEA), the West’s energy watchdog, said surging oil demand, especially in the US, and faltering supplies mean oil prices face upside risks over the next few months.

Last month, US oil demand jumped above 20 million bpd for the first time since the 2008 financial crisis, IEA data showed, although it was not clear whether part of this demand reflected higher exports from US refiners.

Comments form Libyan officials that three oil ports that had shipped around 600,000 bpd of oil could reopen this weekend weighed on Brent prices.

Seizures of ports and oilfields by protesters demanding a bigger share of oil exports have slashed Libya’s oil exports to some 110,000 bpd, from more than 1 million bpd in July.

Investors will keep an eye for US weekly jobless claims due later on Thursday for signs of continued recovery of the world’s biggest economy.

– Upstream

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