LONDON: Brent crude oil fell below $98 a barrel yesterday as concerns over weak demand and plentiful supplies prompted investors and traders to dump the contract, while a strong dollar created further headwinds.
Brent futures have sold off hard this week, dipping to two-year lows. Yesterday, short-covering provided some support early in the session but by the time US traders arrived at their desks the market had resumed its slide.
ICE Brent futures for October were down 36 cents at $97.72 a barrel by 1345 GMT, putting the international oil benchmark on course for its biggest weekly loss since the week to August 1.
The October contract expires on Monday, adding to the selling pressure, as investors and traders have been rolling their positions forward into November. At one point the October contract hit an intraday low of $97.55 a barrel.
US crude was down 15 cents at $92.68 a barrel after closing up $1.16 in the previous session.
Analysts said the market had initially found some support after testing multi-year lows on Thursday, with some investors viewing oil as oversold.
“There was a big bounce in WTI (US) crude yesterday, which is a reflection of the fact that we’ve seen such a big sell off recently that the market was getting a bit over-extended,” said Ole Hansen, senior commodity strategist at Saxo Bank.
But the overall trend remained firmly to the downside, with analysts at Jefferies Bache predicting that October Brent could hit $95 a barrel before Monday’s close.
Crude faced heavy selling on Thursday due to comments in the International Energy Agency’s (IEA) monthly report that weaker consumption in China and Europe had caused global oil demand growth to soften at a remarkable pace.
This was confirmation of a situation that has assailed physical crude markets all summer. Sluggish demand from European and Asian refiners has kept physical prices under pressure and created a glut of oil in the Atlantic Basin. As a result, traders have been stockpiling barrels.
Reuters
