North American shale oil revolution is expected to limit the prospect for further rise in Brent crude oil prices, said Bank of America Merrill Lynch in an e-mailed report. “We expect the balance for light sweet barrels in the Atlantic Basin to gradually shift into surplus towards the end of the year, setting Brent up for a lower trading range in 1Q14,” the report pointed.

The expanding US shale oil production is freeing up more barrels overseas. In the global market, Brent continued to hover around $110/bbl. Supply disruptions in Libya, Nigeria and Iran were seen supporting the commodity prices in the global market.

European crude oil demand has supported the oil prices to certain extent. A mixed economic outlook has succeeded to raise the the consumption in the region, however it has failed to create significant upside in the oil prices. Meanwhile, after refinery and other maintenance work, North Sea production bounced back and barrels were seen moving to Asia.

In sum, the global oil market balance is set to soften up. On a global level, our balances indicate a draw in OECD inventories in 4Q13, albeit the second smallest in 9 years followed by gradual inventory builds in the first half of next year. This does not bode well for either Brent crude oil prices or the term structure of the market. Thus, we reiterate our view that Brent crude oil prices will average $101/bbl in 1Q14 and believe rising inventories will likely lead front-end timespreads to move into contango in the coming months, the bank said.

Meanwhile, US crude oil prices in the global market were seen exhibiting negative sentiments on higher stocks-piles, lower demand and weak market sentiments around the globe. Fresh concerns that US Central Bank may start tapering its monetary stimulus were also putting pressure on the commodity prices in the second half of the October and till now.

US commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.6 mn barrels during the week ending November 1, 2013 from the previous week. At 385.4 mn barrels, US crude oil inventories are above the upper limit of the average range for this time of year, according to a weekly stock-piles report released by the Energy Information Administration (EIA) on 6 November.
Source: Bank of America Merrill Lynch