LONDON: Brent crude oil fell below $104 a barrel on Thursday as a contraction in the German economy underscored sluggish demand in Europe while supply remained strong despite conflict in key exporting countries Iraq and Libya. Germany's economy shrank in the second quarter and France posted no growth, data showed, adding to jitters as the euro zone trades tit-for-tat sanctions with Russia over the crisis in Ukraine.
"We are seeing general weakness in oil, not only because of (ample) supply but also on the demand side," said Abhishek Deshpande, oil analyst at Natixis.
September Brent crude was down 80 cents at $103.48 by 1145 GMT. The contract, which expires on Thursday, hit $102.37 on Wednesday, its weakest since July 2013.
The October contract was trading down 60 cents at $104.30 while US crude was down 19 cents at $97.40 a barrel.
Despite fighting by rival armed factions in Libya, the first oil exports from the port of Ras Lanuf moved this week after a year of protests. In Iraq, OPEC's second largest producer, advances by Islamic State militants in the north of the country have had little impact on output from its southern oilfields.
"The supply outlook has been pretty rosy. OPEC production has been pretty good. Supply in Iraq is unaffected," said Phin Ziebell, economist at the National Australia Bank (NAB). "The situation in the North is desperate but the reality is the majority of the crude production is concentrated in the south of the country," Ziebell said.
US crude inventories rose by 1.4 million barrels last week, data from the Energy Information Administration (EIA) showed on Wednesday, against analysts' expectations for a 2 million-barrel drop.
Crude output by the world's top oil consumer is also expected to rise, the EIA said, as it raised its estimate for 2014 US output to 8.5 million barrels per day (bpd) and to 9.3 million bpd for next year, which would be the highest annual average production level since 1972.
US weekly jobless claims data is due at 1230 GMT, with a Reuters poll of analysts expecting 295,000 initial claims. Data on Wednesday from China, which included a 6 percent fall in its July implied oil demand from June, added to weak sentiment.
Comments
Comments are closed for this article.