Brent crude up on supply cuts; economy woes cap gains

Barrels of oil — File Photo
Barrels of oil — File Photo

SINGAPORE: Brent crude inched above $106 a barrel on Friday on concerns over supply from the Middle East and the North Sea, though worries over a slowing global economy capped gains.

The US Congress passed a new package of sanctions against Iran that aims to punish banks, insurance companies and shippers that help Tehran sell its oil.

This builds on oil trade sanctions signed into law in December that prompted buyers in Japan, South Korea, India and others to slash their purchases of Iranian oil.

Brent crude gained 47 cents to $106.37 per barrel by 0500 GMT, while US rose 46 cents to $87.59. Both crude benchmarks were on track for their second weekly loss.

“The fighting in Syria, tensions in Iran, the North Sea maintenance plan and reduced OPEC daily supply are all coming together and providing support to Brent (prices),” said Nick Trevethan, senior commodities strategist at ANZ Bank in Singapore.

Maintenance work in the British sector of the North Sea will cut crude oil production in September.

The Brent contract is based on four North Sea crude oils — Brent, Forties, Oseberg and Ekofisk — and export programmes for September were expected to show a sharp drop.

Seaborne oil exports from OPEC, excluding Angola and Ecuador, will fall by 120,000 barrels per day in the four weeks to Aug. 18, UK consultancy Oil Movements said.

Adding to supply uncertainty, Iraq's semi-autonomous region of Kurdistan plans to halt oil exports on Aug. 31 if the central government does not make all outstanding payments, the region's minister of natural resources said.

Middle East tensions increased with former UN Secretary-General Kofi Annan quitting as international peace envoy for Syria, frustrated by “finger-pointing” at the United Nations, while the armed rebellion against President Bashar al-Assad becomes increasingly bloody.

Also providing support, US crude oil stockpiles last weekfell by their most since December, while crude imports dropped and oil products also posted unexpected declines, federal government data showed on Wednesday.

Domestic stocks of crude, excluding oil held in the Strategic Petroleum Reserve, fell 6.52 million barrels to 373.59 million barrels in the week to July 27, the Energy Information Administration reported.

Analysts polled by Reuters had forecast a much smaller drop of 700,000 barrels.

Passing the baton

Disappointment that the European Central Bank did not offer more immediate steps to boost economic growth, and weak data from the US and China, capped oil price gains.

The ECB, after keeping interest rates steady, indicated it may resume buying government bonds to drive down surging Spanish and Italian borrowing costs, but passed the baton back to euro zone governments by saying they must act first, disappointing markets.

China's official purchasing managers' index (PMI) for the services sector fell to 55.6 in July from 56.7 in June as growth in new orders eased, official statistics showed on Friday.

Investors also have reason to be more cautious ahead of key US non-farm payrolls data for July due at 1230 GMT.

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True Pakistani
Aug 03, 2012 09:10am
its means gasoline prices go"up"more