Brent slips to $107 on global oil glut

Brent crude nudged lower but held above $107 per barrel on Wednesday, with a global oil glut keeping prices in check despite geopolitical tensions threatening supplies from key oil producing regions.

The European Union threatened Russia with harsher sanctions over Ukraine, while Israel pounded targets across the Gaza Strip with no ceasefire in sight, according to Reuters.

Brent crude for September delivery fell $0.06 to $107.27 a barrel by Wednesday morning, after slipping $0.35 in the previous session.

US crude for September delivery was $0.34 lower at $102.05 per barrel.

“The fundamentals in Brent are very weak with a glut in places like Nigeria and Angola. But upcoming maintenance in the North Sea will help relieve that glut, which I think will support Brent in the next month or two,” Newedge Japan commodity sales manager Yusuke Seta told Reuters.

“And with strong supporting news in places like Iraq and Russia, I believe the bearish market sentiment is temporary,” Seta said.

Investors in energy markets will focus their attention on the weekly crude oil inventory report from the US Department of Energy’s Energy Information Administration due at Wednesday morning.

Stocks are expected to decline 2.8 million barrels in the week to 18 July, according to a Reuters survey.

Domestic crude stocks fell by 7.5 million barrels the previous week, the biggest draw since January, caused by a sharp increase in refinery activity.

The American Petroleum Institute data released on Tuesday showed that US crude inventories fell 555,000 barrels last week to 374.7 million.

The European Union threatened Russia, the world’s biggest producer of crude oil, on Tuesday with harsher sanctions over Ukraine that could inflict wider damage on its economy following the downing of a Malaysian airliner, but it delayed action for a few days.

Efforts to forge a united front were hampered by a French announcement that the planned delivery of a warship to Moscow would go ahead despite US and British pleas to halt it.

Israel continued bombing across the Gaza Strip on Tuesday, saying no ceasefire was near as top US and United Nations diplomats pursued talks on halting the fighting that has claimed more than 600 lives.

In Libya, oil production had fallen to around 450,000 barrels per day as of Monday compared with 555,000 bpd on Thursday, a National Oil Company spokesman said.

The drop comes as a twin suicide bombing at a Libyan army base in Benghazi killed at least four solders.

Still, more crude from the North African country could hit global markets with the Brega oil port expected to be operating within a “few days” after the government reached a deal with protesting security guards to end a blockade.

Oil supply from southern Iraq remained unaffected after fighting broke out in Iraq between Sunni militants and government forces last month.

On Monday and Tuesday, Iraqi government air strikes killed 19 people, including children, in Falluja.

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