On Thursday, Brent crude fell to below $97, a two-year low for the sixth trading session in a row as worries over weak demand and increasing supply outweighed concerns of Middle East conflicts affecting oil production.
In June, North Sea crude oil reached a high above $115 as Islamist insurgents swept through northern Iraq. According to an energy watchdog, the slumping economic growth in Europe and China has affected demand significantly at a time when there are increasing supplies in North America.
According to CNBC, a report released on Thursday morning by the International Energy Agency, IEA said, “The recent slowdown in demand growth is nothing short of remarkable. While demand growth is still expected to gain momentum, the expected pace of recovery is now looking somewhat more subdued.”
October delivery Brent dropped $1.32 to a $96.72 low, the weakest from July 2012, before bouncing back slightly to $96.90, after closing $1.12 down in the previous trading session.
US crude dropped $1.14 at $90.53 per barrel.
Reuters reported that the IEA is expecting supply from non-OPEC supply to increase by 1.6 million barrels a day in 2014 and by an additional 1.3 million barrels a day in 2015 due to the boom in North American shale oil.
This indicates that the world will require less oil from OPEC members and the IEA cut the estimated 2015 demand for OPEC crude and stock to 29.6 million barrels a day by 300,000 barrels a day.
OPEC pumped 30.31 million barrels a day in August.
OPEC has cut its demand estimates for its crude this year and 2015 showing a surplus of above 1 million barrels a day in 2015 if they continue with the current production levels.
Andrey Kryuchenkov, oil strategist at VTB Capital said the prices of oil had been undermined by the oil surplus in the Atlantic Basin and Ukraine’s easing tensions.
Kryuchenkov said, “The Atlantic Basin supply glut is still weighing on sentiment, made worse by the uneasy truce in Ukraine. Demand concerns could take some time to dissipate.”
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