26 August 2014 – Brent crude nudged up towards $103 per barrel on Tuesday but overnight gains may prove fragile in the face of persistent supply pressure and weak economic data in major consumer countries.
The global oil benchmark is set for a second monthly decline in August as slow growth in China and Europe has curbed oil demand and led to a supply glut in the Atlantic Basin.
That ample supply has negated the effects on crude of geopolitical tensions.
October Brent crude rose $0.13 to $102.78 per barrel as of Tuesday morning after closing up $0.36.
US crude for October delivery gained $0.17 to $93.52 per barrel after settling down for the third straight session on Monday.
Technical charts showed that oil futures, especially West Texas Intermediate, were in oversold territory, Phillip Futures senior commodities manager Avtar Sandu told Reuters.
“There’s not much room for prices to move lower,” he said. “The market needs a new driver.”
Investors have unwound a geopolitical risk premium in Brent, discounting the possibility of supply disruption despite conflict in Iraq, Libya and Ukraine.
Iraqi Kurdistan has managed to export a few cargoes despite the Islamist insurgency in the north.
“The Kurds are getting their house in order and starting to export oil,” Sandu said. “There is ample oil.”
Still, political instability reigns in Iraq and Libya as opposing factions fight to gain control of the countries. Libya’s ambassador to Egypt, Mohamed Jibril, called on Monday for foreign assistance to protect its institutions, airports and natural resources, especially the oilfields.
The US is preparing military options to put pressure on the Islamic State in Syria, although no decision has been made to expand US action beyond the limited air strikes under way in Iraq.
In Europe, Ukraine accused Russia of sending troops across their border, which could deal a blow to already slim hopes of progress at Tuesday’s talks between the countries’ presidents.
Investors will scour weekly US oil inventory data due on Tuesday and Wednesday that could shed more light on supply and demand in the world’s largest oil consumer.
US commercial crude oil inventories are forecast to have increased in the week to 22 August, while refined product stockpiles fell, a preliminary Reuters survey of four analysts showed on Monday.
The analysts estimated, on average, that crude oil stocks rose 1.8 million barrels last week. Inventories for distillates and gasoline were expected to fall 800,000 barrels and 1.6 million barrels respectively.
*Bianca Bartucciotto – Upstreamonline