Brent crude dropped to a two-year low below $97 a barrel on Thursday, falling for a sixth straight session as mounting supply and weak demand outweighed speculation that conflicts in the Middle East could curb oil production.North Sea crude oil hit a high above $115 in June as Islamist insurgents swept across northern Iraq, taking control of several oilfields, but prices have now fallen more than 15% from their highs as supply from other countries has increased much faster than demand.
The West’s energy watchdog said on Thursday slowing global economic growth, particularly in China and Europe, had curbed oil demand severely at a time when supplies were growing steadily, particularly from North America.
“The recent slowdown in demand growth is nothing short of remarkable,” the International Energy Agency (IEA) said in a monthly report, cutting its oil demand growth projections for 2014 and 2015.
Brent for October fell $1.32 to a low of $96.72 a barrel, its weakest since July 2012, before recovering slightly to trade around $97.10 by 13:15 GMT. It closed $1.12 lower in the previous session.
US crude was down 85 cents at $90.82 a barrel.
The IEA expects non-Opec supply to expand by 1.6 million barrels per day (bpd) in 2014, and by another 1.3 million bpd in 2015, thanks mainly to the North American shale oil boom.
That means the world will need less oil from the Organization of the Petroleum Exporting Countries, and the IEA cut its estimate of demand for OPEC crude and stocks for 2015 by 300 000 bpd to 29.6 million bpd.
In August, Opec pumped 30.31 million bpd.
Opec has also cut its estimates of demand for its oil this year and next, pointing to a surplus of over 1 million bpd in 2015 if the group keeps output at current levels.
VTB Capital oil strategist Andrey Kryuchenkov said oil prices had been undermined by a surplus of oil in the Atlantic Basin and an easing of tensions in Ukraine, which had raised concerns over the future of Russian oil supplies.
“The Atlantic Basin supply glut is still weighing on sentiment, made worse by the uneasy truce in Ukraine,” Kryuchenkov said. “Demand concerns could take some time to dissipate.”
But world political worries remained in place.
President Barack Obama told Americans on Wednesday he had authorised US airstrikes for the first time in Syria and more attacks in Iraq in a broad escalation of a campaign against the Islamic State militant group.
Iraq is Opec’s second-biggest oil producer and exporter and investors are concerned about the potential impact on supplies, although Iraq’s oil industry has so far remained largely unaffected by the turmoil in the north of the country.
Libya could amplify the oversupply concerns after Prime Minister Abdullah al-Thinni said oil production was expected to rise to 1 million bpd in October.
