Oil prices lower after US data

Oil prices lower after US data

Wednesday, July 2, 2014 6:42 pm

LONDON – Oil prices fell on Wednesday, hit by the prospect of higher Libyan output but losses were capped by a bigger-than-expected drop in US crude inventories and Iraq unrest, analysts said.

Brent North Sea crude for delivery in August dropped 71 cents to stand at $111.58 a barrel in late London deals.

US benchmark West Texas Intermediate for August slipped 43 cents to $104.91 a barrel compared with Tuesday’s close.

“Brent crude prices have set aside concerns about the situation in Iraq and chosen to focus on the fact that supplies from Libya appear to be on the verge of restarting,” said Michael Hewson, chief market analyst at traders CMC Markets UK.

The US Energy Information Administration meanwhile said that the American commercial crude inventories had fallen by 3.2 million barrels last week, almost twice the amount predicted by analysts.

Oil prices “found support after inventory data fell, indicating greater US consumption”, said Chris Beauchamp, market analyst at IG traders.

In a further boost for the US economy, the ADP payrolls company said the country’s private sector added 281,000 jobs in June, much higher than May’s 179,000.

Official government data on the US jobs market for June will be published on Thursday.

Singapore’s United Overseas Bank (UOB) said oil prices retained support “on upbeat manufacturing data in China”.

Chinese manufacturing activity expanded at its fastest pace this year in June, an official survey showed on Tuesday, in a sign that Beijing’s attempts to tackle slowing growth in the world’s number two economy and top energy consumer are gaining traction.

UOB said concerns are easing over a possible supply disruption in major crude producer Iraq.

Islamist militants have overrun swathes of territory in Iraq in a lightning offensive since June 9, but have so far yet to directly threaten the key oil-producing region in the country’s south.

Kuwait Oil Minister Ali al-Omair on Wednesday said he expects oil prices to ease following a rise prompted by unrest in Iraq and Libya.

“Markets have witnessed a slight increase recently, but this rise will not last for long as prices will stabilise. They have already started to ease and return to normal levels,” said Omair, cited by the official KUNA news agency.

He attributed recent price support to violence in Iraq and Libya, both key oil producers and exporters in the Organization of Petroleum Exporting Countries.

Omair said that the violence in Iraq, where Islamist militants launched a lightning offensive on June 9, has not impacted crude supplies.

The violence in Iraq has a direct bearing on global crude prices however because the country is the second-largest oil exporter in the 12-nation OPEC after Saudi Arabia.

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