© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
August 1, 2014 10:27 am
US crude extended its losses on Friday, falling below the $98-a-barrel mark to its lowest level since February, following the news of a longer than expected shutdown at a key oil refinery.
Oil market experts had anticipated a drop in US oil demand and prices ahead of the refinery maintenance period, which starts as early as the end of August and continues through to October.
But a spate of unplanned outages, as a result of fires, glitches and other incidents, has already reduced refinery runs ahead of schedule.
CVR Refining said on Thursday that its 120,000-barrel-a-day refinery in Coffeyville, Kansas – which is a major consumer of benchmark West Texas Intermediate crude – might be shut for as long as four weeks after a fire in a gasoline-related unit earlier in the week.
“The unplanned CVR outage means Cushing [the country’s biggest storage hub and delivery point for its benchmark futures contract] stocks are now likely to build in August, potentially taking inventories closer to or even above 20m barrels, which means September’s starting point is far less tight,” said analysts at London-based consultancy Energy Aspects.
Nymex September West Texas Intermediate fell 76 cents to $97.42 a barrel in afternoon trading, after hitting $97.09 – the lowest in almost six months. The contract slid 6.8 per cent in July, posting its worst monthly performance since May 2012.
Meanwhile, ICE September Brent, the international benchmark, declined 87 cents to $105.16 a barrel. It had dropped 5.6 per cent last month – the biggest decline since April 2013.
Oil prices have retreated after hitting highs in June as fears over supply disruptions mounted in response to escalating tensions in the Middle East, Africa and Europe.
“Additional oil from Libya, the fact that initial fears of supply interruptions caused by Isis terrorism have faded, a stronger dollar and concerns about stalling oil demand especially from China have been the bear factors at work eroding prices,” said David Hufton at PVM.
Global oil production has exceeded demand. Weak refining margins in Europe and Asia have reduced crude intake, weighing on the Brent contract, said analysts at JBC Energy.
“There is also an overhang of light-sweet crude in the Atlantic Basin in line with the low crude intake levels and higher availability of US and Canadian crude imports that have been freed up on the back of the shale boom,” they added.
Although there is no imminent risk of a disruption to oil exports from Russia, traders are closely watching the impact of more punitive sanctions against the nation, which could lead to more price volatility.
Libya also remains a great concern, said Olivier Jakob at Petromatrix, as evacuations from Tripoli continue. Oil production stands at around 500,000 b/d, still at around half the levels of 2012.
Please don't cut articles from FT.com and redistribute by email or post to the web.
Sign up for email briefings to stay up to date on topics you are interested in