*Set for weekly fall on ample supply
26 September 2014, SINGAPORE – Brent crude slipped below $97 a barrel on Friday, set for its third weekly fall in four, as hefty supplies erased price gains and outweighed concerns that rising tensions in the Middle East could disrupt supply.
France has joined a US-led coalition which stepped up air strikes on Islamic State targets in Syria and Iraq. Still, investors discounted supply risks as strong global production has overwhelmed demand with Libya ramping up output amid slowing economic growth in Europe and China.
Brent for November delivery slipped 4 cents to $96.96 a barrel by 0523 GMT. Front-month prices fell to an intra-day low of $95.60 on Wednesday, the lowest since July 2012.
US crude eased 1 cent to $92.52 a barrel, heading for a modest gain for a second straight week.
The continued air strikes have raised concerns over possible supply outages but did not provide support for oil prices, said ANZ in a note. Even refinery outages and higher US gasoline futures failed to impact US oil, it added.
“The economics of the world aren’t fantastic,” said Jonathan Barratt, chief investment officer at Ayers Alliance in Sydney.
“If the economics do not follow through, and it looks like they are not going to, then prices should come down a lot lower.”
Governments from China to Japan and Europe are under pressure to inject stimulus and revive their economies. Slowing economic activity has dampened demand for oil while supply is on the rise with Libya’s output reaching 925,000 barrels per day, the highest before militias turned on each after the overthrow of Muammar Gaddafi.
Top oil exporter Saudi Arabia is likely to keep its output steady throughout the rest of the year as world consumption is expected to rise and domestic demand for crude eases during the winter after its output fell 408,000 bpd in August versus July.
Still, there is an element of oil supply risk that the market is not currently focusing on as the militants were infiltrating into nations, Barratt said.
“I feel that the market was discounted too much,” he said.
Air strikes on Islamic State targets in Iraq and Syria gained momentum as French fighter jets joined those from the United States, while Britain is seeking to join the US-led coalition.
Iran President Hassan Rouhani on Thursday blamed the rise of the Islamic State group and other militants on the mistakes of the West and said the solution to stopping them must come from the Middle East.