Prices for Brent crude oil dropped back to below $100 a barrel on Tuesday, down the fourth day following pressure from strong supply.
Prices were not significantly above the recent low of 16 months because the feared loss of supply due to violence in Middle East has not materialized. Further weakness has been prevented by the potential for the disruption of production in Iraq.
Brent had an advantage following the closure of North Sea Buzzard oilfield of Britain, which was struggling to return from its maintenance. Buzzard is the largest contributor to Forties crude stream that assists in underpinning benchmark dated Brent’s prices.
According to Reuters, Brent was down to $99.99 by 21 cents at 1339 GMT after closing the previous trading session lower by 62 cents. The prices dropped below $100 on Monday for the first time in 14 months and hit a $99.36 low, the weakest since May 2013.
Brent fell to a low of $99.57 on Tuesday, 11% down this quarter, the biggest slump since Q2 of 2012. However, analysts predict that the possible threats to the production in Libya and Iraq might lead to sharp gains within a short period.
SEB analyst, Bjarne Schieldrop said, “It’s a well supplied market. But it’s well supplied as a result of extreme risk, with Saudi Arabia keeping production at 10 million barrels daily, perhaps as a precaution in the event of problems in the south of Iraq.”
USA Today reported that Michael Green, AAA spokesman said, “If we can get through September without any major refinery or overseas problems, we should see more gas stations drop below $3 a gallon this fall.”
Gas prices in August averaged $3.46. Currently, ten states have the average of $3.25 per gallon or less.
Paul Christopher, Wells Fargo Advisors Investment Strategist said, “I suspect oil cannot fail further than $90 per barrel. Saudi Arabia and other OPEC members will start cutting production if oil continues to fall like this.”
To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
To contact the reporter of the story: Jonathan Millet at email@example.com