24 July 2013, News Wires – Brent crude oil fell below $108 per barrel on Tuesday as recent strong gains in prices fed into worries about demand growth, with the global economic recovery seen as fragile.
Brent crude oil fell below $108 per barrel on Tuesday as recent strong gains in prices fed into worries about demand growth, with the global economic recovery seen as fragile.
Brent futures lost 40 cents to $107.75 a barrel by 0915 GMT.
US crude slipped 76 cents to $106.18 a barrel, after pulling back sharply on Monday from last week’s 16-month high.
Brent is still up more than 5% this month and US crude almost 10%, bolstered by economic optimism, supply disruption in Libya and worries about escalating violence in the Middle East.
However, analysts said economic recovery in the wake of a deep recession in many developed and emerging economies remained vulnerable to weak spending by hard-pressed consumers.
Olivier Jakob, analyst at Petromatrix in Zug, Switzerland, highlighted the role of the dollar’s strength in making oil more expensive outside the United States.
“There is a price impact on demand. If you look at some currencies, oil at around $110 now is equivalent to around $127 a year ago,” he said. “It’s a factor capping prices.”
Threats to supply in the Middle East and North Africa kept a floor under prices, with new clashes in Egypt and a halt in oil exports from eastern Libya after protests.
US commercial crude oil stockpiles likely fell for a fourth straight week, a Reuters poll of seven analysts showed on Monday.
The poll, taken before weekly inventory reports from the American Petroleum Institute, API, on Tuesday and the US Department of Energy’s Energy Information Administration, EIA, on Wednesday, forecast that crude stocks fell 2.4 million barrels on average in the week ended 19 July.
European benchmark Brent’s premium over US West Texas Intermediate increased. The September contract was trading about $1.66 higher than its US equivalent, after the two front-month crude benchmark contracts converged this week.
Goldman Sachs said in a note that it expects Brent’s premium to expand again, with a forecast of an average spread of $8-$9 for 2014.
Protesters demanding jobs closed off the eastern Libyan port of Zueitina for a sixth day on Monday, extending a halt in oil exports, according to a senior oil industry source and one of the demonstrators.
Zueitina Oil Co pumps between 60,000 and 70,000 barrels per day, but its terminal has the capacity to handle about 20% of Libya’s crude oil exports.
Also increasing supply risks, the family of Egypt’s ousted Islamist president said on Monday it would take legal action against the army as his supporters and opponents clashed in street battles in central Cairo.
Any Middle East conflict raises worries of disruption to oil-producing areas or shipments, although none has taken place due to the Egyptian crisis so far.