14 August 2014 – Brent crude fell below $104 a barrel on Thursday, after briefly bouncing in the previous day off a 13-month low, on ample supplies and concerns about weak demand despite the ongoing political turmoil in Iraq and Ukraine.
Oil exports from Libya’s Ras Lanuf port have resumed after an oil tanker carrying 670,000 barrels of crude left its oil terminal. This was its first shipment since the port was reopened following a year of blockades by armed protesters.
Besides the abundant supply, there were also concerns about demand after an unexpected increase in US crude stocks. Its inventories rose by 1.4 million barrels last week, data from the Energy Information Administration (EIA) showed on Wednesday, against analysts’ expectations for a 2 million-barrel drop in stocks.
September Brent crude fell 50 cents to $103.78 a barrel early on Thursday after settling at $104.28 on Wednesday.
The September contract expires on Thursday.
US crude was down 28 cents at $97.31 a barrel.
“The supply outlook has been pretty rosy. Opec production has been pretty good. Supply in Iraq is unaffected,” said Phin Ziebell, economist at the National Australia Bank (NAB).
Fresh Chinese data, including its implied oil demand, fixed-asset, property investment and retail sales, released on Wednesday pointed to a weak economic outlook.
The world’s top energy consumer’s implied oil demand was down 6% in July from June as crude runs fell. On the other hand, China exported its highest net volume of fuel so far this year.
US crude production is expected to go higher. The EIA revised its estimates of crude production forecasts for this year to 8.5 million barrels per day compared to a previous estimate of 8.42 million bpd, and for next year’s output to 9.3 million bpd from 9.27 million bpd previously.
The 2015 forecast represents the highest annual average level of oil production since 1972.
The fall in oil prices, though, could be capped by the persisting tensions in Iraq although supplies have not been affected.
“The situation in the North is desperate but the reality is the majority of the crude production is concentrated in the South of the country,” said Ziebell of NAB.
Thousands of civilians are currently under siege from Sunni militant fighters and a team of US military and aid personnel landed on Iraq’s Mount Sinjar to assess how to evacuate them.
The European Union is also looking into how it could tighten sanctions to stop Islamic State militants from selling oil from fields they have overrun in Syria, a European diplomat said on Wednesday.