Potential for rising supplies from Libya together with slowing demand from Asia and China in particular has impacted the price of Brent Crude Oil which is struggling to back up towards $110/bbl, according to Ole S Hansen, Head of Commodity Strategy at Saxo Bank.Crude oil rose during the week as geopolitical concerns mitigated potential price-negative fundamental news. WTI crude got an additional boost from strong gasoline demand but the continued rise in domestic crude inventories, not least in storage facilities along the Mexican Gulf, may eventually pose a threat to the current relative price strength of WTI crude. The increased availability of non-exportable crude on the Gulf coast, the fact that only a limited number of vessels have permission to transport domestically-produced crude to other US ports as well as the continued rise in inventories, could eventually lead to lower prices especially considering the recently established flow of oil south from Cushing to the region.

Brent crude saw its premium over WTI narrow to 4 US dollars per barrel for the first time since last September on a combination of WTI-positive drivers but also rising headwinds in the global market place. Brent crude, being transported by sea, is the global benchmark and therefore more sensitive to changes in the global outlook for supply and demand.

OPEC reduced its estimates for how much it needs to produce by 100,000 to 29.6 million barrels per day due to the continued increase in US and Canadian production. Meanwhile, in its monthly report, the International Energy Agency (IEA) left its forecast for global demand in 2014 unchanged at 92.7 million barrels per day.

US oil production is running at the highest level since 1988 which has helped stockpiles rise to a four-month high. The Energy Information Administration (EIA) also reported that the US is now meeting 87 percent of its energy needs, the highest level since 1989 as proven US reserves reach the highest level in 36 years, primarily driven by new technologies such as ucrnlocking crude from shale formations.
Source: Saxo Bank