Crude oil hovers below US$100 a barrel on economic, supply worries

Photo: The Canadian Press. All rights reserved.

An oil worker connects pipes on a new oil rig Jan. 14, 2014, in the Persian Gulf desert oil field of Sakhir, Bahrain. THE CANADIAN PRESS/AP, Hasan Jamali

The price of oil slipped a little on Tuesday as the market weighed potentially weaker global economic growth against continued disruptions of Libyan crude supplies.

Benchmark West Texas Intermediate crude for May delivery fell 41 cents to close at US$99.19 a barrel on the New York Mercantile Exchange. Brent crude, used to set prices for international varieties used by many U.S. refineries, rose seven cents to close at US$106.99 in London.

U.S. and Brent crude have hovered in narrow ranges over the past week as supply and demand concerns have balanced each other out. Global supplies have tightened somewhat as Libyan crude exports have fallen, but the world may need less oil if economic growth in China and Russia slows.

Energy analyst Jim Ritterbusch wrote in a report Tuesday that trading patterns were sending off "signals of a balanced oil market."

The U.S. and other Group of Seven countries vowed to launch co-ordinated sanctions on key parts of the Russian economy, which could include the energy industry, if Russian President Vladimir Putin presses further into Ukraine after the annexation of the Crimean peninsula. While that could eventually reduce Russian oil production, it could also reduce Russian demand for diesel, gasoline and jet fuel if the sanctions crimp the Russian economy.

A report on factory activity in China fell to an eight-year low in March, suggesting a further slowdown of the world's second-biggest economy and a possible decline in oil demand growth. A similar index for the U.S. fell from a four-year high.

The Libya oil industry, meanwhile, continues to have production problems. The flow of its high-quality crude, which is coveted by European refiners, has been on-again, off-again since the 2011 civil war which ousted Moammar Gadhafi. For now, it has all but dried up.

"Apart from the offshore fields, the production (in Libya) is now basically out," said Olivier Jakob of Petromatrix in Switzerland.

Prices could retreat further if forecasts for a 10th consecutive increase in U.S. stockpiles of crude oil are confirmed. Data for the week ended March 21 are expected to show a build of 2.6 million barrels in crude oil stocks and a decline of 1.8 million barrels in gasoline stocks, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.

The oil supply report from the U.S. Energy Department's Energy Information Administration, the industry benchmark, will be out on Wednesday.

In other energy futures trading on Nymex, wholesale gasoline fell 0.4 of a cent to close at US$2.882 a U.S. gallon (3.79 litres), heating oil rose 1.1 cents to close at US$2.921 a gallon and natural gas rose 13.5 cents to close at $4.411 per 1,000 cubic feet.

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