By Moming Zhou Aug 13, 2014 6:13 AM GMT+1200
Brent crude fell to the lowest in 13 months as the International Energy Agency said a supply glut was shielding the market against threats in the Middle East. West Texas Intermediate also declined.
Brent headed for the biggest loss in four weeks. The IEA cut projections for demand growth this year and next and estimated that output from the Organization of Petroleum Exporting Countries rose to a five-month high. Libya prepared to export crude from a key port for the first time in a year.
“The IEA report knocked the market pretty hard today,” said Bill Baruch, a senior market strategist at Iitrader.com in Chicago. “Demand worry has really been moving the market. There is really no reason for WTI to push above $100 unless there is a major supply disruption.”
Brent for September settlement dropped $1.49, or 1.4 percent, to $103.19 a barrel at 1:58 p.m.New York time on the London-based ICE Futures Europe exchange after falling to $102.65, the lowest intraday level since July 1, 2013. The volume of all futures traded was about 44 percent above the 100-day average.
The September Brent contract traded more than 3,100 times from 12:58 p.m. to 1 pm as prices fell below $102.98, the intraday low from Nov. 8. In the prior three minutes, 475 lots changed hands.
WTI for September delivery decreased 40 cents, or 0.4 percent, to $97.68 a barrel on the New York Mercantile Exchange. Volume was 2.8 percent below the 100-day average. The European benchmark crude was at a premium of $5.71 to WTI on the ICE, compared with $6.60 yesterday.
Slower Growth
WTI hit an intraday low of $96.81 at 12:59 p.m. as volume jumped. Approximately 4,037 September contracts changed hands in one minute, according to data compiled by Bloomberg.
Brent also fell as Libya loaded the first oil cargo from the port of Ras Lanuf since it was closed by rebels a year ago. A tanker will soon leave port with 680,000 barrels of crude and head to Italy, Ibrahim Al-Awami, the Oil Ministry’s Director of Measurement, said by phone today from Tripoli.
The Paris-based IEA reduced estimates for global oil demand growth by 180,000 barrels a day in 2014 and by 90,000 barrels in 2015. The annual expansion in fuel consumption slowed to 700,000 barrels a day in the second quarter, the lowest level since early 2012.
“Despite armed conflict in Libya, Iraq and Ukraine, the oil market today looks better supplied than expected, with an oil glut even reported in the Atlantic Basin,” said the agency, which advises 29 nations on energy policy.
Political Conflict
In Iraq, OPEC’s second-largest supplier after Saudi Arabia, the political crisis deepened as embattled Prime Minister Nouri al-Maliki refused to hand power to designated successor Haidar al-Abadi. Maliki called Abadi’s appointment by President Fouad Masoum “legally worthless” and defied pressure from some fellow Shiite political figures and U.S. President Barack Obama to step aside.
The U.S. and some Iraqi leaders have blamed Maliki’s divisive policies for the success of the Sunni insurgents, an al-Qaeda offshoot. Obama, who authorized air attacks against Islamic State in northern Iraq over the weekend, has tied expanded U.S. strikes to the formation of a more inclusive government capable of easing sectarian and ethnic divisions.
Ample Supplies
“None of the geopolitical developments impact short-term supplies,” Amrita Sen, chief oil analyst at consultants Energy Aspects Ltd. in London, said in a report. “Crude inventories are plentiful.”
The U.S. and European Union sanctions against Russia aren’t supporting the oil market because the impact is “questionable” in medium term, the IEA said. Neither set of sanctions will have any tangible near-term impact on oil supplies.
“The market may have expected geopolitical issues to impact production, but the larger issue is the conflict between Russia and Ukraine has had an impact on the Russia economic picture and also on the European economic picture,” said Michael Cohen, an analyst at Barclays Plc in New York. “Both European and Russian demand growth will be impacted by the conflict