Brent Holding Above $107 on Supply Cuts
Despite worries over weak Chinese economic data, Brent crude oil remained above $107 on a weaker dollar and geopolitical problems in the Middle East and Africa that have begun to affect supply. The commodity traded at $107.50 at 6:28 GMT on Friday morning.
The dollar dipped to a five week low on Friday, making oil less expensive to holders of other currencies. Speculation that the Federal Reserve may try to underscore its plans to keep interest rates low for the foreseeable future by changing its forward guidance was largely responsible for the dollar's fall. Despite the news, most analysts still see the Fed beginning to taper its $85 billion per month stimulus plan in September.
Supply disruptions also lent support to the commodity, as several sources are facing oil production setbacks. Reuters reported that the North Sea's Forties pipeline is undergoing maintenance which has cut pumping rates by 40,000 barrels per day. Maintenance will also be responsible for Iraqi crude exports falling by 400,000 to 500,000 barrels per day in September.
Conflict in oil rich nations is also cutting into crude exports as protests in Libya have stopped exports completely at a key port. South Sudan is expected to follow suit and put a stop to their crude output on August 7 over a conflict with Sudan. In Yemen, a key export pipeline was damaged in an explosion set off by tribesmen.
Moving forward, investors are keeping an eye on Egypt as supporters and opponents of ousted President Mohammed Morsi gather for another day of protests on Friday. Although Egypt itself doesn't produce oil, investors are worried that the nation's tension could spillover and ignite a larger conflict in the Middle East.
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