Brent Down as Analysts Predict Supply Will Outweigh Demand
Brent crude oil traded at 107.90 on Friday morning, a loss in anticipation that economic growth in the United States, the number one oil consumer, will not be enough to outweigh increasing supply.
Although the market temporarily rebounded over positive unemployment and housing data from the US and promising PMI data in China, investors are realizing that increased supply coupled with the financial crisis in Europe is going to drive prices down. Though many believe the US and China are on the upswing, it may not be fast enough to account for decreased demand from debt-burdened Europe.
Prices saw a hike on Thursday as hurricane Sandy neared the U.S. coastline. The National Hurricane Center is forecasting this to be the worst storm in the Northeast in the past 100 years. As the storm develops and more details become available, investors may see a bit of support for Brent prices.
At the moment though, this support is heavily outweighed by underwhelming economic data and overwhelming supply increases. Buzzard Oil Field is set to increase output in just 10 days, flooding the market with oil at a time demand is not expected to increase.
According to a Bloomberg survey, between increased supply and US stockpiles being at their highest since 1982, 44 percent of analysts surveyed believe crude will head downward through the beginning of November.
Although the economic data seems to point to lower prices, 42 percent of the analysts surveyed predicted prices to rise over the same time period. This could be due to tension in the Middle East and trouble with Nigerian oil output.
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