SINGAPORE: Brent crude edged below $125 on Monday as a possible resumption in crude production fromSouth Sudanoffset supply worries on news of a sizeable drop in Iranian oil exports due to Western sanctions.
Oil supply disruptions fromIran,Syria,South SudanandYemenhave supported oil prices this year, with Brent rising 16 percent so far this year.South Sudansaid on Saturday that it hopes to resolve a row over oil and other outstanding issues withSudanwithin a month or two.
Oil rallied on Friday, narrowing its losses last week, on the first sizeable drop in Iranian exports as some buyers stopped or scaled back purchases to avoid Western sanctions aimed atIran's disputed nuclear program.
Brent crude edged down 29 cents to $124.84 by 0304 GMT after posting a 68-cent weekly loss on Friday, a second straight weekly decline. US crude fell 30 cents to $106.57.
"The geopolitical risk has been overly built into oil prices as we are in a low demand period where inventories are rising," said Tony Nunan, a Tokyo-based risk manager at Mitsubishi Corp.
"Oil has a bias towards the downside in the next one to two months, but most investors are bullish in the medium- to long term so it's hard to sell down."
Money managers cut their net longUScrude futures and options positions, in the week to March 20, the US Commodity Futures Trading Commission, said in a report on Friday.
Crude exports fromIranappear to have fallen this month by around 300,000 barrels per day (bpd), or 14 percent, the first sizeable drop in shipments this year, according to estimates from industry consultant Petrologistics and an oil company.
A restart atSouth Sudan's oil fields will bring output from the two countries back to about 350,000 barrels per day, up from about 50,000 bpd currently.
"It's not a small amount and the oil is needed inAsia," Nunan said, adding that the resumption in supply could keep oil prices from rising in summer.
NORTH KOREAPLANS ROCKET LAUNCH
US President Barack Obama vowed on Monday to pursue further strategic arms reductions withRussiaas part of his broader nuclear disarmament agenda even as he issued stern warnings toNorth KoreaandIranin their nuclear standoffs with the West.
Washingtonhas condemnedNorth Korea's planned rocket launch next month as a violation of the reclusive state's promise to halt long-range missile firings, nuclear tests and uranium enrichment in return for a resumption of food aid.
"If there's any conflict in the East, it will damage economic growth, (which is) bad for oil demand," Mitsubishi's Nunan said.
On the economic front, a pick-up in theUnited Statesis offsetting a slowdown inChina, Nunan said, adding that the recession in the euro zone is going to a drag on its economy although the worst is over.
Commodity prices will also be taking their cue from the US dollar this week, Tim Waterer, a senior forex dealer at CMC Markets said.
"If greenback's demand is nullified by lowerUSyields and the absence of widespread risk aversion, then key commodity prices, like gold and oil, have room to move on the upside," he said in a note.
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