- POSTED: 23 Aug 2014 04:25
Oil prices retreated on Friday (Aug 22) as investors focused on the prospect of having too much oil supply amid weakening demand in the global market.
NEW YORK: Oil prices retreated on Friday (Aug 22) 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 US$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 US$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 (IEA), 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 on 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."