October 18, 2012 / 12:27 PM / in 6 years

Oil falls to $112, supply concerns ease

LONDON (Reuters) - Oil dropped to $112 a barrel on Thursday, pressured by signs of a healthier supply outlook and a rise in U.S. jobless claims, offsetting Chinese data signaling stabilization in the economy of the world’s second-largest oil consumer.

A man fills his truck up with gas at a gas station in Santa Monica, California, May 28, 2008. REUTERS/Lucy Nicholson

U.S. crude inventories rose more than expected last week, a report showed on Wednesday. <EIA/S> This weekend Britain’s largest oilfield, Buzzard, is scheduled to restart, increasing supply of crude underpinning the Brent contract.

Brent crude for December delivery was down $1.22 at $112.00 a barrel by 1352 GMT, after settling 78 cents lower. U.S. oil for November fell $1.08 to $91.04.

“Brent is currently under pressure,” said Carsten Fritsch, analyst at Commerzbank in Frankfurt. “The fact that North Sea supply is due to rebound with the restart of the Buzzard field may also be a factor for the weaker tone of the Brent price.”

In a further addition to supplies, Sudan issued a tender to sell Dar Blend crude in November after parliaments in Khartoum and South Sudan ratified an agreement this week to end hostilities and restart southern oil exports.

The market made a further downward lurch after the U.S. jobs report. Initial claims for state unemployment benefits rose 46,000 to a seasonally adjusted 388,000, the Labor Department said on Thursday.

Oil had edged higher earlier in the session. China’s economy grew 7.4 percent in the third quarter from a year ago, in line with forecasts, while industrial production, retail sales and investment data were all slightly ahead of expectations.

Still, China’s growth rate fell short of the official 7.5 percent target and an expansion of 7.4 percent still represents a sharp slowdown for the country, where the economy grew 9.2 percent in 2011.

“The Chinese data was pretty neutral for the market,” said Tony Machacek, an oil futures broker at Jefferies Bache in London. “If support around $113-$112.50 gives way, we could fall quite a bit lower.”

Goldman Sachs, in a note to clients on Wednesday, cut its Brent price forecast for 2013 to $110 a barrel from $130, citing an increasing outlook for supply outside of the Organization of the Petroleum Exporting Countries.

The bank, which up until now had the highest oil price prediction among major forecasters, said it still expected the physical market to remain tight and maintained a near-term target of $120.


Brent has gained more than 4 percent this year, partly due to supply-side concerns.

North Sea output has underperformed as fields including Nexen’s NXY.TO Buzzard shut for maintenance, supporting Brent. Buzzard, which has missed previous timetables to restart, is currently due to resume output by Sunday.

A strike in Norway earlier this year also cut North Sea supply, supporting prices. A union leader said on Thursday Norwegian oil service workers voted in favor of a proposed wage deal, avoiding another potential strike.

Iranian exports have fallen due to Western sanctions and the risk of wider supply disruption arising from Iran’s nuclear programme is still putting a floor under the market.

In another sign of Tehran defying international demands to curb its disputed nuclear programme, Western diplomats said Iran was believed to be increasing its uranium enrichment capacity at its Fordow plant buried deep underground.

Concerns about Europe’s debt crisis remain a bearish factor for oil. Germany and France clashed on Thursday over greater European Union control of national budgets and moves towards a single banking supervisor, before a summit of EU leaders.

In Greece, workers went on strike for the second time in three weeks over wage and pension cuts.

Additional reporting by Manash Goswami; editing by Anthony Barker and James Jukwey

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