Oil drifts lower as traders balance supply and demand
July 26, 2014, 12:00 am TWN
LONDON--Oil prices nudged lower on Friday as traders balanced soft gasoline demand in the United States and plentiful global supplies, against upbeat Chinese manufacturing data and ongoing geopolitical concerns.
Brent North Sea crude for delivery in September dipped two cents to stand at US$107.05 per barrel in early afternoon London deals.
U.S. benchmark West Texas Intermediate for September fell nine cents to US$101.98 a barrel.
"Despite a draw in the weekly oil inventories, the global supply output still looks healthy enough to maintain southward pressure on prices," said Capital Spreads dealer Jonathan Sudaria.
A report by the U.S. Energy Information Administration said on Wednesday that American crude inventories tumbled by four million barrels in the week ending July 18. That marked the fourth weekly decline in a row and was far bigger than the 2.5 million-barrel decline forecast by analysts.
However, the report also showed U.S. gasoline inventories rose 3.38 million barrels, even though many Americans are taking to the road for their holidays in the peak-demand driving season.
Rising supplies tend to indicate weak demand in the United States, which is the world's top crude oil consuming nation.
"WTI prices are kept pressured under by gasoline inventories, which expanded for the third straight week despite the ongoing driving season in the U.S.," said CMC Markets analyst Desmond Chua.
"Meanwhile the slide in Brent has been kept in check due to the possibilities of tougher sanctions against Russia, which may spark an oil crunch in Europe," he told AFP.
HSBC bank's preliminary purchasing managers index of Chinese manufacturing activity hit an 18-month high of 52.0 in July, a further sign the world's second-largest economy is gaining momentum.
China is the world's top energy consuming nation.
The oil market experienced choppy trade this week as traders took their cue from geopolitical tensions affecting key crude producing regions Russia and the Middle East.
Investors are keeping an eye on events in eastern Europe as the U.S. and its allies plan another round of sanctions on Russia for its support of rebels accused of shooting down a Malaysia Airlines airliner in a disaster which killed 298 people last week.
Brent prices briefly topped US$108 on Thursday as traders fretted over the possibility of new sanctions against key oil producer Russia.