Oil underpinned by Algerian hostage crisis

 Resize text         Printer-friendly version of this article Printer-friendly version of this article

Brent oil futures rose above $110 per barrel on Thursday after Islamist militants attacked an Algerian gas plant and took Western hostages, although concerns about a weak global economic outlook kept gains in check.

Islamist fighters have opened up an international front in Mali's civil war after attacking BP's In Amenas gas producing facility on Wednesday. The fighters have taken dozens of hostages just as French troops launched an offensive against rebels in neighbouring Mali.

However a rise in shale oil production in the United States and increased flow through the Seaway pipeline to the Gulf coast of the United States has prevented a big jump in prices, analysts said.

Brent futures rose 63 cents to $110.31 a barrel by 1246 GMT. The February contract, which expired on Wednesday, settled 31 cents higher, while the March contract finished 5 cents up. U.S. oil rose 54 cents to $94.77.

The expansion of the Seaway pipeline has unblocked more crude for the U.S. Gulf Coast refineries, limiting the demand for imports from the world's largest economy and oil importer.

"The other impact of Seaway is that it has created spare capacity in Saudi Arabia," said Olivier Jakob of consultancy Petromatrix in Zug, Switzerland.

"In the last quarters, there was no spare capacity. Today we have recreated a capacity cushion so if we have a disruption now, (it lowers) the spike potential."

DOWNBEAT DEMAND

A series of data showing worsening economic conditions in Europe, the ongoing uncertainty surrounding an agreement over the U.S. debt ceiling and a forecast of weak crude demand in 2013 also kept prices subdued.

Worries about the global economy were revived on Wednesday after the World Bank cut its forecast for world growth in 2013 to 2.4 percent from its previous estimate of 3 percent.

The decline in economic activity may lead to poor energy demand, and the Organization of the Petroleum Exporting Countries (OPEC) cut its demand forecast for its crude in 2013 by 100,000 barrels per day to 29.65 million bpd.

OPEC's is the second of this month's three closely watched supply and demand reports to be released. The U.S. government's Energy Information Administration last week trimmed its 2013 demand growth forecast by 20,000 bpd.

The International Energy Agency, adviser to 28 industrialised countries, issues its report on Friday.

A surprise fall in crude inventory in the United States, the world's biggest oil consumer, offered some support to oil.

U.S. crude stocks fell by 951,000 barrels to 360.3 million barrels last week as imports dropped and fuel stocks rose, weekly data from the U.S. Energy Information Administration showed on Wednesday. Analysts polled by Reuters had expected stocks to rise of 2.3 million barrels.

"The decline in crude use has taken place from previously elevated levels that had been encouraged by good refining margins," BNP Paribas analysts said in a report.

Imports fell by 312,000 barrels per day (bpd) to 7.99 million bpd in the week. Gasoline supply rose by 1.91 million barrels, compared with analyst expectations for a 2.9 million barrel climb.

Further ahead, Iran is expected to return to the foreground after the International Atomic Energy Agency completes talks in Tehran. The West suspects the country of aiming to build nuclear weapons.

Negotiations between Iran and six world powers may resume later this month. The last set of talks in June failed to make a breakthrough. (Additional reporting by Ramya Venugopal; editing by Jason Neely and Keiron Henderson)



Comments (0) Leave a comment 

Name
e-Mail (required)
Location

Comment:

characters left


Jumpstart

JUMPSTART can be mixed with water and fed in the farrowing barn to supplement young pigs or can be fed ... Read More

View all Products in this segment

View All Buyers Guides

Feedback Form
Generate Leads