LONDON: Brent crude oil steadied below $105 per barrel yesterday, close to an eight-month low, as investors worried faltering global growth and recession in some developed economies would cap energy demand at a time of increasing global supply.
Oil prices found some support from worries over increasing tension in North Korea and a stalemate in talks between Iran and Western nations, raising fears of a possible disruption to fuel supplies from the Middle East.
Brent was unchanged at $104.66 per barrel by 1415 GMT, not far above a low of $103.40 reached on Monday, its weakest since last July. US crude futures was unchanged at $93.36 per barrel.
Both crude contracts strengthened earlier yesterday after news of lower-than-expected Chinese inflation which could help bolster demand in the world’s second biggest oil consumer.
China’s annual consumer inflation eased to 2.1 percent in March from 3.2 percent in February, while producer price deflation deepened, data showed yesterday.
But the short-covering rally quickly petered out and analysts said further losses could be in prospect. “With oil stocks so high, supply improving and the outlook for oil demand so uncertain, there seems to be little basis for a strong, sustained rally,” said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt.
Brent has fallen from a peak above $119 at the beginning of February, with nearby North Sea crude futures bearing much of the pressure as investors switched into other assets.
The prompt Brent futures contract slumped last week to a discount below the second month for the first time in nine months, throwing the front of the price curve into “contango”.
Brent’s premium over U S light crude, also known as West Texas Intermediate or WTI has also narrowed to about $11 from $23 over the last two months.
Analysts say the Brent-WTI spread could narrow further as European concerns weigh on Brent, while the start-up of a new pipeline will alleviate a glut of crude at the Cushing, Oklahoma, hub for U S oil, and keep the US crude contract well supported.
Oil markets await U S inventory data for the week ended April 5. Data last week showed an inventory build last seen in 1990, dragging oil prices down to an eight-month low on Friday. A Reuters analysts’ survey showed crude stockpiles were expected to rise by 1.5 million barrels.
Reuters
