Brent drops toward $105 on rising supply

Brent crude slipped toward $105 a barrel today as concerns over a rise in supply from Libya and Iran dragged on prices, although an Opec production cut checked losses.

Libya’s crude production has partially recovered after it restarted output at the El Sharara field, while progress in nuclear talks between the major powers and Iran could soon ease sanctions that have curbed exports from the Opec producer.

Brent crude fell 15 cents to $105.60 a barrel by 0722 GMT, on track for a weekly decline of 1.7 per cent.

US crude inched up 27 cents to $94.23 a barrel and was set to post its first weekly gain in three weeks.

“Iran and Libya could probably resume oil production and this could cap oil prices,” said Tetsu Emori, a commodity fund manager at Astmax Investment.

Sanctions have cut Iran’s oil exports by more than half over the past 18 months to about 1 million barrels per day (bpd). But Iran may soon be able to release more supply into world markets if a dispute over its nuclear work can be resolved.

A preliminary accord between Iran and the P5+1 group of world powers will start on January 20th while talks on a final settlement will start in February.

Iran expects fellow Opec members to cut back output and make room for rising oil supplies from Tehran when Western sanctions are lifted, foreign minister Mohammad Javad Zarif said.

The restart of Libya’s El Sharara two weeks ago and a jump in exports from Iraq’s southern terminals in the first two weeks of 2014 also weighed on crude prices.

But the oil market will remain supported as domestic tensions continue to threaten the oil sector in Libya, where authorities held talks this week with protesters who threatened to restart a blockade of the El Sharara field.

Also, Iraq’s supply could be cut in February on loading delays caused partly by bad weather.

Outages in Libya and elsewhere are taking a toll on output from Opec, which is pumping less than this year’s global need for its crude, the exporter group said yesterday.

In the United States, new pipeline capacity to divert excess oil away from West Texas Intermediate's delivery point in Cushing, Oklahoma, is being brought onstream, narrowing Brent's premium to WTI.

The spread has shed more than $4 this week and today touched a four-week low of $11.37 a barrel. (Reuters)