Oil steadies but surplus still weighs

LONDON — Brent crude oil steadied at about $105 a barrel on Monday as worry about global oversupply outweighed concern over escalating violence in North Africa and the Middle East. A supply glut in West African and Atlantic markets dragged Brent down 3,3 percent last week, despite geopolitical tension in Iraq, Libya and Ukraine that could disrupt oil production in the future.

Brent crude was up 16c at $105 a barrel in the morning, after falling $1,18 on Friday to $104,84 a barrel, its lowest settlement since April 2.
US crude edged up 20c to $98,08 after ending last week at its lowest settlement since February 6. The US contract futures fell more than 4 percent last week in their biggest weekly decline since January. Prompt Brent has now been at a discount to later barrels, in a formation called a contango, for it’s longest period since 2011, indicating a very weak market.

“Physical markets may be just starting to stabilise, but are still relatively weak,” said Olivier Jakob at Petromatrix consultancy in Switzerland. “Brent is still in a contango.”

Mr Jakob said escalating violence in Iraq and Libya would continue to put pressure on the oil market in the coming week.
“Libya is really going down the wrong way, production has been slowly coming off,” he said. “Libya could quickly return to a much lower production level.”

Libya’s government said more than 20 people had been killed on Sunday, while fighting led to a huge fire raging nearby at the city’s fuel depot, as battles raged for control of the capital’s airport in the worst violence since the 2011-Nato-backed civil war.

In Iraq, Islamic State fighters seized control of the Ain Zalah oilfield and the country’s largest dam on Sunday, although the insurgents are not near major oilfields around Kirkuk, in their first major victory over Kurdish forces since sweeping across much of northern Iraq in June.

In Europe, Ukrainian government forces seized two towns on the outskirts of Donetsk from pro-Russia separatists on Saturday, bringing the army to the edge of one of the two major cities still in rebel hands. – Reuters.