01 August 2014 – Brent crude held near $106 a barrel on Friday as ample supply continued to drag on prices a day after the benchmark posted its worst monthly performance since April 2013.
Analysts expect global production to exceed demand this year, while a supply glut has built up in Africa and Europe.
Brent crude was flat at $106.02 a barrel early on Friday after a 5.6% drop in prices last month.
US crude futures for September delivery fell 13 cents to $98.04 a barrel, following a 6.8% decline last month, the biggest monthly loss since May 2012.
“Suddenly, people wake up and realise that even with the geopolitical risks in the world there is this surplus of physical crude,” said Tony Nunan, a senior risk manager at Mitsubishi.
Still, Brent’s forward prices have risen substantially on worries about longer term oil output in Iraq and Libya, he said.
Opec’s second largest producer Iraq is battling an Islamic insurgency in the north. The conflict threatens to split the country, but has yet to have an impact on near-record oil exports from the south.
Baghdad is also embroiled in a dispute with Iraqi Kurdistan over oil exports via Turkey.
Production at another Opec producer Libya remained way below the more than 1 million bpd that it was pumping in 2012 before protests curbed output and exports.
Given the overall supply situation, normally there would be a steeper fall in oil prices, Nunan said. “But the reason we’re not is because Opec has so many geopolitical issues.”
Energy investments in Russia also faced delays after sanctions imposed by the United States and European Union limited access to funds.
The spread between Brent and West Texas Intermediate has stretched to near $8 a barrel on closure of a refinery that is a major consumer of WTI crude.
CVR Refining said on Thursday that its 115,000 barrel per day Coffeyville, Kansas, refinery, could be down four weeks after a 29 July fire in the facility’s isomerization unit.