NEW YORK: Crude oil prices on both sides of the Atlantic dropped sharply yesterday, falling for the fifth straight session as traders liquidated long positions in the face of rising North Sea supplies and the potential for the US Federal Reserve to roll back its monetary stimulus programme.
US RBOB petrol futures tumbled to a one-month low, at $2.81 per gallon, also pressuring the rest of the oil complex lower.
“If you are looking for a reason that the complex is under pressure, the biggest culprit is the RBOB contract and if you project that into the crack (spread) you can see that it is falling faster that crude,” said Bob Yawger, director of energy futures at Mizuho Securities USA, in New York City.
The crack spread is the price differential between oil and the products it yields. Front-month Brent crude oil was trading $1.57 per barrel lower to $105.87 by 10:47am EDT (1447 GMT), having reached an earlier high of $107.86. U.S. crude was down $2.04 at $102.32.
The market brushed off news that imports of crude oil into China, the world’s second-largest oil consumer, hit a record high. Exports from the North Sea are scheduled to rise in September following maintenance. The higher expected supply of oil from the UK countered bullish news from China.
“The North Sea is one of the main drivers today ... the increasing supplies are having an effect,” said Bjarne Schieldrop, an analyst at SEB. Further decreases in crude stockpiles in top consumer the United States also had little positive effect. Inventories declined by 1.32 million barrels last week, according to the Energy Information Administration.
While US jobless claims rose slightly last week, they were near their lowest level since before the financial crisis. Oil market participants are also concerned that if the US Federal Reserve rolls back its monetary stimulus, liquidity on global markets will be reduced.
Tightening supplies in major producers Iraq and Libya kept losses in check. In Libya, workers’ protests remain a key concern. Output of its main crude oil grade, Es Sider, has been shut since Tuesday, along with the fields producing Amna and Sirtica, following strikes at the Es Sider and Ras Lanuf terminals.
Libya’s production is expected to fall further as workers at its Arabian Gulf Oil Company plan to progressively reduce output in protest over management changes and the company’s structure. Also contributing to lower supply is Iraq, where exports are set to fall sharply in September as major work is carried out at its vital southern export terminals.
Reuters
