Oil prices fall despite lingering supply concerns
Tensions in Eastern Europe and the Middle East are also heightening fears of supply disruption. PHOTO: REUTERS
Oil prices fell on Friday, pressured by an unexpected rise in US crude and fuel inventories while investors took profits after the global benchmarks touched seven-year highs this week.
Brent crude futures were down $1.55, or 1.7%, at $86.83 a barrel by 1214 GMT. The contract earlier fell by as much as 3%, the most since December 20. A day earlier the global benchmark hit a seven-year high of $89.50.
US West Texas Intermediate (WTI) crude futures slid $1.62, or 1.8%, to $83.93. The contract had fallen as much as 3.2%, also the most since December 20, after rising to its highest since October 2014 on Wednesday.
The recent rally in crude prices appeared to run out of steam on Thursday when Brent and WTI ended the trading session with slim losses, but both benchmarks have gained more than 10% this year and are heading for a fifth straight weekly gain.
"The latest pullback is most likely due to a combination of pre-weekend profit-taking and the absence of fresh bullish catalysts," said PVM analyst Stephen Brennock, noting bearish data from the Energy Information Administration (EIA).
The EIA reported the first US stockbuild since November and gasoline inventories at an 11-month high, against industry expectations.
The EIA also reported a slight decline in refinery runs, indicating lower demand for crude.
However, analysts expect the pressure on prices to be limited owing to supply concerns and rising demand.
OPEC+, which groups the Organisation of the Petroleum Exporting Countries (OPEC) with Russia and other producers, is struggling to hit its monthly output increase target of 400,000 barrels per day (bpd).
Tensions in Eastern Europe and the Middle East are also heightening fears of supply disruption.
Top Russian and US diplomats played down any prospect of resolving their differences over Ukraine at talks on Friday.
UBS expects crude oil demand to reach record highs this year and for Brent to trade in a range of $80-90 a barrel for now.
Meanwhile, Morgan Stanley has raised its Brent price forecast to $100 a barrel in the third quarter, up from its previous projection of $90.