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Dhaka Friday,  Mar 29, 2024

Oil prices head lower on oversupply worries

NEW YORK, Aug 23, 2014 (BSS/AFP) – Oil prices retreated yesterday as investors focused on the prospect of having too much oil supply amid weakening demand in the global market.

US benchmark West Texas Intermediate for October delivery finished trade at $93.65 a barrel, down 31 cents from Thursday’s close.

Brent North Sea crude for October, Europe’s main futures contract, dropped 34 cents to settle at $102.29 a barrel in London trade.

“The market is fixating its view on the possibility of having
too much oil, and demand has been adjusted down by the IEA,” said
Bart Melek of TD Securities.

“This is what has been driving the market the whole week,
including today.”

The International Energy Agency, in its latest oil market
report, lowered its forecast for crude demand in 2014 and 2015,
citing slower global economic growth.

The IEA cited a “surprisingly steep” decline in oil demand in
developed economies and described the market as generally flush
with supply.

Commerzbank highlighted Friday the impact on the oil market
of growing oil production in the United States, the world’s
largest crude consumer, where data is suggesting growth is
modestly picking up.

“US oil production last month achieved its highest July level
in 28 years, meaning that oil imports declined to their lowest
July level in 19 years despite the increased demand,” the German
bank said in a research note.

US oil product imports plunged to a 33-year low despite
distillate demand achieving a seven-year high, illustrating the
impact of increasing shale-oil production on the US market,
Commerzbank said.

“In addition, there are also noticeable effects on the
international market, however, as the oil that is no longer being
imported into the US is flooding the world market instead and
generating pressure on prices there.”

JP Morgan Securities noted that Brent was due for price
pressure from refineries’ seasonal maintenance cycle.

“With autumn refinery maintenance fast approaching, North Sea
crude markets may now face an extended period of unsupportive
factors that are likely to weigh on price,” the US bank said in a
research note.

“Brent is unlikely to gather speed until early October.
European refineries are not aggressively buying North Sea grades;
refinery maintenance is about to increase; and Libyan supplies
are running ahead of expectations.”

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