22 October 2014, News Wires – Brent crude futures steadied above $86 per barrel on Wednesday, clinging to gains from the previous session as buyers gradually returned to a market hammered to four-year lows by abundant supply.
Expectations that oil demand may pick up in the near term have helped the crude benchmark regain ground after weeks of steep losses that have cut the price by a quarter since June.
“I don’t expect any further sharp declines because even though economic activity is still limited, especially in Europe, it’s recovering in Asia and hopefully demand for crude should recover after another 3 to 4 weeks of refinery maintenance in the US.”
Brent crude for December delivery was up $0.03 at $86.25 by Wednesday morning, pulling further away from last week’s low of $82.60, which was its weakest since 2010.
December US crude was down $0.02 at $82.47 per barrel.
US crude inventories rose 1.2 million barrels last week, less than the forecast increase of 2.7 million barrels, data from the American Petroleum Institute showed on Tuesday.
Implied oil demand in China, the world’s second largest oil consumer, jumped 6.2% in September from August to hit a seven-month peak, as crude runs soared to their second-highest point this year.
The numbers released on Tuesday helped offset pessimism from data showing China’s economy expanded by its slowest pace since 2009 in the third quarter.
Standard Chartered Bank oil analyst Paul Horsnell, known for forecasting the market’s long rally a decade ago, is sticking with a bullish bias despite the slump in prices this year.
Horsnell and his team have cut their Brent forecast for 2015 by $5 but still expect $105, among the more bullish forecasts.
“According to our supply and demand tabulations and those of the main agencies, there is no immediate oil glut,” they wrote in a note.
While there was no excess supply in the fourth quarter, that situation would emerge in the first quarter of 2015, which would require the Organization of the Petroleum Exporting Countries (OPEC) to take oil off the market, StanChart analysts told Reuters.
While some OPEC members, including Saudi Arabia and Kuwait, have indicated that the group was unlikely to cut production to rescue prices, others such as Libya are pushing for a reduction.
Falling oil prices have prompted Iran to accuse fellow Muslim countries of plotting with the West to bring down oil prices as a way of further undermining its sanctions-hit economy.
The administration of Iranian President Hassan Rouhani has been scrambling for alternative sources of income to meet its forecast for revenue in the current budget, which is based on an oil price of $100 per barrel.