07 May 2013, News Wires – UK Brent crude futures slipped back towards $105 per barrel on Tuesday as investors saw the recent surge in prices as an opportunity to sell and book profits, with concerns of an escalation in tensions in the Middle East helping to stem losses.
The benchmark hit its highest in nearly a month above $105 in the previous session as supply worries following Israeli air strikes on Syria trumped concern of weak global demand, Reuters reported.
Oil also drew support from a record close of the Standard & Poor’s 500 Index on hopes of a steady US recovery.
Brent crude slipped 36 cents to $105.10 per barrel by early Tuesday morning, after settling up at $105.46, its highest finish since 10 April.
Brent has rebounded by more than $6 per barrel since falling below $99 last Wednesday. US oil fell 44 cents to $95.71, after ending 55 cents higher.
“There is some profit-taking coming in after the sharp rise in prices we saw in the recent days,” Reuters quoted Astmax Investments commodities sales manager Tetsu Emori as saying in Tokyo.
“The current fundamentals are very weak with China slowing down and with US demand not so strong.”
Israel played down weekend air strikes close to Damascus reported to have killed dozens of Syrian soldiers, saying the raids were not aimed at influencing its neighbour’s civil war but only at stopping Iranian missiles reaching Lebanese Hezbollah militants.
Expectations of a further build in US commercial crude stocks after hitting a record high are also weighing on prices.
A preliminary Reuters poll, taken ahead of weekly inventory reports from the American Petroleum Institute and the US Energy Department’s Energy Information Administration, forecast on average that crude stocks increased by 1.8 million barrels in the week ended 3 May.
Brent looks like forming a top around $105.50 per barrel and is due for a deep correction, while US oil is expected to retest support at $94.65, according to Reuters technical analyst Wang Tao.
Brent may find strong support at $100 per barrel and the US benchmark at $90, Emori said, adding that prices were unlikely to break below those levels as many producing and exporting countries need oil to hold near there to support annual budgets.
“The option to influence prices is more with producers than with the demand side,” said Emori.
“If prices fall sharply, producers will just lower output and exports.”
Brent crude is expected to rise in the second half of 2013, Reuters cited Morgan Stanley as saying in a research note on Monday.
The bank said the global oil balance looked much tighter this summer with Brent prices likely to trade up to $110 to $115 per barrel in the second half of this year.
In the week to 30 April, hedge funds and other large speculators increased bets on higher Brent prices, upping their net long positions by 9,614 contracts to 108,741, according to data from the Intercontinental Exchange released on Monday