Published September 02, 2014
Brent crude oil futures fell to the lowest level in 16 months on Tuesday, pressured by the prospect of slowing oil demand growth in China and Europe, while a strong dollar and ample supplies pushed U.S. prices to a seven-month low.
Oil prices on both sides of the Atlantic have been in steady decline since the end of June as concerns faded over supply disruptions from Iraq, Libya and Russia. Continued supply from key producing regions and tepid demand has left global markets well stocked.
Brent crude for October delivery fell $2.45 to settle at $100.34 a barrel, its lowest closing price since May 1, 2013. U.S. crude dropped $3.08 from Friday's close to settle at $92.88 a barrel, the lowest since Jan. 14. There was no trading in the United States on Monday because of the Labor Day holiday.
"There was some buying going into the long weekend and you are seeing that premium come out," said Oliver Sloup, director of managed futures at iitrader.com in Chicago. "The dollar is strong today and the U.S. has so much oil and has the capability to produce more."
Euro zone manufacturing growth slowed more than initially thought in August, data showed, while growth in China's factory sector slipped to a three-month low last month, adding to concerns about oil demand.
The euro sagged to fresh one-year lows against the dollar on bets the European Central Bank will do more to help a wobbly euro zone economy, while the pound fell to a near five-month low versus the greenback on worries about a Scottish secession.
Further pressure came from the prospect of resuming oil supplies from the Buzzard field in the North Sea. The Buzzard field, the biggest contributor to the Forties oil stream, one of the four crudes that underpin the price of Brent crude oil futures, may be shut for up to a week, after going offline at the weekend.
"We have to watch the Buzzard oilfield, but as long as we have plentiful supplies in the European market, the upside for Brent will be rather limited," said Carsten Fritsch, an oil analyst at Commerzbank in Frankfurt.
Analysts were beginning to watch for a turnaround in U.S. prices after a steep fall from above $107 a barrel in June. Some saw strong support at $90 a barrel and before that, between $92 and $92.50.
Demand for physical crude has withered in recent months, creating a glut in Asia and the Atlantic basin and causing the futures market to flip into contango, in which oil for delivery in the future is priced higher than that for immediate delivery.
This has encouraged traders to store crude, with Energy Aspects saying that 75 percent of the 40 million barrels of storage capacity in South Africa's Saldanha Bay has been filled. (Reporting by Edward McAllister in New York, additional reporting by Robert Gibbons and Catherine Ngai, Claire Milhench in London, Jacob Gronholt-Pedersen in Singapore; Editing by Marguerita Choy)