ET:Brent slips towards $102 as weak supply outlook weighs
SINGAPORE: Brent futures slipped towards $102 a barrel on Wednesday on concerns about rising supplies from the United States and a bleak outlook for global demand growth.
Brent is down some 14 percent from its 2013 peak as China demand weakens and US stockpiles touch record levels, while the latest International Energy Agency (IEA) report on rising US shale oil production further dampened sentiment. Oil has also faced pressure from a stronger US dollar in the last few sessions.
Brent crude slipped 20 cents to $102.40 a barrel by 0632 GMT, after settling 22 cents lower. US oil fell 12 cents to $94.09, declining for a fifth straight day, matching a similar losing streak in December.
Prices were also under pressure from the latest data out of Europe that showed Germany narrowly skirted a recession in the first quarter.
"Both data from the United States and comments by the IEA show that demand is weak while supplies are rising, and that is posing a downside risk for oil," said Ker Chung Yang, senior investment analyst at Phillip Futures in Singapore. "In the last few days, the strength in the dollar is weighing across commodities."
A firm dollar pressures oil as its strength makes commodities more expensive for holders of other currencies.
Earlier in the day, oil was drawing support from equities, with Wall Street rallying without a significant correction since the start of the year, pushing major indexes to all-time highs. US stocks rallied to fresh highs on Tuesday.
Rising US shale oil production will help meet most of the world's new demand in the next five years, even if the global economy picks up steam, the West's energy agency, the IEA, said on Tuesday.
It also said OPEC's spare capacity will rise by over a quarter to reach 6.4 million bpd, or 6.6 percent of global demand, giving an additional cushion to potential supply shocks.
"North America has set off a supply shock that is sending ripples throughout the world," IEA Executive Director Maria van der Hoeven said.
STOCKPILES
The American Petroleum Institute (API) reported that crude inventories rose 1.1 million barrels in the week to May 10, far higher than forecast, with the gain led by an increase of more than 750,000 barrels in Midwest stockpiles.
Investors await data from the US Department of Energy's Energy Information Administration (EIA) later in the day to gauge the country's demand outlook.
"Signs of rising output from OPEC and ongoing builds in US oil inventories (according to industry data) dampened sentiment," ANZ analysts said in a note.
Brent is expected to drop to $101.35 as it is riding on a downward wave c, while US oil should drop to $92.43, Reuters technical analyst Wang Tao says.
