Oil nears $107 as supply offsets global tension

LONDON: Brent crude oil fell toward $107 a barrel as ample supply outweighed concerns over political tensions in the Middle East, Africa and Europe.
Despite conflicts in Ukraine, Iraq and Libya, global oil production has exceeded demand, leaving pockets of excess supply in Africa and Europe.
“The likelihood of a supply disruption remains extremely low as the ability of other regions to respond, particularly the US energy sector, remains high,” analysts at Goldman Sachs led by Jeffrey Currie said in a note to clients.
Brent crude was down 30 cents at $107.27 a barrel by 1400 GMT, after dropping nearly 0.8 percent in the previous session. US crude dropped $1.20 to $100.47 a barrel, its lowest since mid-July.
Crude exports from second-largest OPEC producer Iraq stayed near record levels as oil output in the south remained untouched by the conflict with militants.
Olivier Jakob, an analyst at Petromatrix in Zug, Switzerland, said West African physical crude markets were over-supplied.
“There are still a lot of cargoes from West Africa looking for a home,” Jakob said. “But from the support side there is a lot of geopolitical input.”
In Libya, oil production fell to around 450,000 barrels per day (bpd) last week as escalating violence threatened a hard-won deal to restore oil exports.
Libya’s capital Tripoli has slipped into chaos, but analysts said the OPEC producer’s low output, at way below 1 million barrels per day for close to two years, has already been factored into oil prices.
US and European leaders agreed on Monday to impose wider sanctions on Russia’s financial, defense and energy sectors, although these were not expected to impact Russian oil exports.
The European Union will try to reach a final deal on Tuesday on stronger sanctions, which would include restrictions on energy technology.
But further sanctions against Russia could damage the euro zone’s economic recovery.
A firm dollar also kept a lid on oil by making the commodity expensive for holders of other currencies.
The dollar held close to a six-month high against a basket of major currencies on Tuesday, ahead of a policy review this week by the US Federal Reserve.
In the US, traders watched for weekly data on gasoline stocks, which have been weighing on US crude prices.
A Reuters survey said US gasoline stocks could have risen by 1 million barrels last week, adding to bloated supplies. US commercial crude oil inventories probably dropped in the week to July 25, the survey showed.