TR:Brent Holds Above $110 as US Stalemate Persists
LONDON--Brent crude-oil futures slipped back Tuesday but held above $110 a barrel, with subdued volumes expected as investors await news from key meetings in Washington and Geneva.
Upward pressure may be imminent with supply disruptions in the North Sea possible later in the week.
ICE Brent crude for November delivery was trading down 49 cents at $110.55 a barrel on ICE Futures Europe, while Nymex crude was down 53 cents at $101.88 a barrel on the New York Mercantile Exchange.
"Brent may soon have to deal with potential disruption in North Sea production if a planned strike at Grangemouth refinery, which plays a key role in the supply of Forties crude, goes ahead," wrote JBC Energy analysts.
Labor unions informed refinery operator, Ineos, that workers would strike for 48 hours from Oct 20.
Any tightening in Brent supply could push up the price and widen further the gap between the price of crude in the North Sea and the U.S. WTI benchmark, which is currently hovering around $8.77.
Tuesday, trading volumes were subdued as the budget impasse in Washington dragged on. Data on supply of crude and products from the U.S. Energy Information Administration, due Thursday, won't be published.
Oil markets are likely to be driven by any changes in the deadlock between parties in the Senate, according to analysts at brokerage PVM.
"Washington is in charge of the next oil price move. If they mess up financial markets will go into a tail spin and oil will be caught up in the hurricane. The chances of Washington allowing that to happen should be zero but that is what we thought about Lehmans," PVM said in a note to clients.
A fresh round of nuclear talk begins Tuesday between Iran and the five permanent members of the United Nations Security Council plus Germany. Any relaxation of international sanctions against Iran would likely put downward pressure on the oil price, noted Commerzbank.
Over the last two years Iranian oil exports have declined by more than 1 million barrels a day as a result of the sanctions. Saudi Arabia has stepped up production to fill that gap.
"If Iranian oil were to return to the world market, there would therefore be increased pressure on Saudi Arabia to scale back its supply again," Commerzbank analysts wrote. "If the country were not to reduce its supply, the oil price would come under noticeable pressure and might even fall below the critical $100 per barrel mark."
ICE gasoil for November changed hands at $938.50 a metric ton, up $7.00 from Monday's settlement. Gasoline for November was down 3 points at $2.6665 a gallon.
