London - Brent crude oil fell towards $101 (R1,081) a barrel on Thursday, just above a 14-month low, on plentiful fuel supplies and as Chinese economic data pointed to slowing demand, although prices began recovering in early US trading.
The world's top two crude oil benchmarks have fallen by more than $10 a barrel since June on a build-up of supply in the Atlantic Basin and diminishing worries over the risk that conflicts in the Middle East would hit production.
Global economic growth also appears to be faltering, adding to concerns that a market surplus could last for some time.
“Economic data from some major demand countries ... came in disappointing recently, fuelling demand concerns,” Germany's Commerzbank said in a research note on Thursday.
“China registered a surprise slump in aggregate financing in July. The economic engine is also stuttering in Europe, as suggested by stagnating euro zone GDP in the second quarter and the strong fall in the German ZEW sentiment indicator,” the bank added.
On the supply side, Libya has resumed exports from its largest port, helping push its oil output to the highest level for months, while top exporter Saudi Arabia raised its output in July to 10 million barrels per day (bpd).
“Supply fears have been quelled by an increased export volume from Libya. Exports have resumed from Libya's largest port following the end of the year-long blockade,” said Dorian Lucas, an analyst at energy consultancy Inenco.
Brent crude for October dropped as low as $101.21 a barrel on Thursday before recovering to $101.68 by 15:15 SA time.
It touched $101.07 on Tuesday, its lowest since June 26, 2013.
US crude slipped to its lowest since January at $92.50 a barrel, down 95 cents, before recovering to around $93.43 in early US trading.
“There is no shortage of oil,” said Andrey Kryuchenkov, an oil strategist at Russian bank VTB Capital in London.
Investors are more concerned about weak demand at a time when the supply outlook remains generally comfortable, despite world political worries, he said.
“Fighting in Iraq has had only a very limited impact on producing and transporting facilities. At the same time, lagging European demand and the seasonal lull in Asia continue to weigh on sentiment,” Kryuchenkov said.
A survey of China's factory activity showed that growth in the sector slowed to a three-month low in August, adding to concerns about economic softness that could depress oil use in the world's second-largest oil consumer.
“This is a figure which indicates that growth is likely to be reasonably moderate and any upside to current expectations about China will be possibly muted,” said Ric Spooner, chief analyst at CMC Markets.
“It will be generally a negative for commodities.”
The drop in Brent towards $100 has sparked talk that OPEC could consider cutting output, although delegates from the producer group have said higher seasonal demand in coming weeks is expected to support the market.
Prices would have to be lower over a sustained period before OPEC cuts output, Spooner said.
“Oil is doing what it should be doing based purely on fundamentals,” said Abhishek Deshpande, lead oil analyst at French bank Natixis in London.
“I would not be surprised to see Brent touching $100 a barrel or even slightly lower for a brief period of time as market fundamentals are so weak right now.”
In the United States, a larger-than-expected drop in crude inventories last week buoyed West Texas Intermediate and helped the September contract gain $1.59 a barrel on its last day of trade.
Societe Generale analysts said in a note that the weekly statistics were moderately bearish for products and could drive US refineries to start maintenance early. - Reuters