Oil price: Brent crude falls to $109 on output rise

Crude Oil Price

Brent futures for July delivery declined by almost 0.5 percent on Friday to finish the week at $109.56 a barrel. The benchmark crude price has eased further today and was trading at $109.00 as of 14:15. Brent rose 1.24 percent last month.

The fall comes as Libya’s Hariga port is expected to resume operations after Libyan authorities approved salary payments to Petroleum Facilities Guard members who were preventing the loading of crude onto tankers at the terminal, according to Mohamed Elharari, a spokesman for Libya’s National Oil Corp., who spoke to Bloomberg by phone. Internal problems have helped reduce Libya – which is home to Africa’s largest proven reserves – to the smallest exporter in the Organization of Petroleum Exporting Countries (OPEC).

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Other positive news for the global supply of oil, which has the potential of driving down prices, emerged from Iraq, where Aljazeera reported that oil exports grew by eight percent in May and were at an average of 2.582 million barrels per day. However, they remain below the Iraqi government’s target of 3.4 million. The global crude market will be focusing on the next meeting of OPEC scheduled for June 11 in Vienna. Changes to production quotas have a direct effect on supply and, therefore, on prices.

After their lowest close in more than a week on Friday, West Texas Intermediate futures for July clearance retraced some of their losses as data indicated manufacturing in China, the world’s second-largest oil consumer, grew at the fastest rate this year. However, after reaching a high of $103.13 a barrel today, the price changed direction yet again and was trading at $102.75 as of 13:34 BST. WTI gained three percent in May.

The National Bureau of Statistics and China Federation of Logistics and Purchasing in Beijing reported yesterday that the country’s Purchasing Managers’ Index advanced to 50.8 in May, while the median estimate of analysts surveyed by Bloomberg News had pointed to a 50.7 rise.

“The Chinese manufacturing PMI came out better than expected, indicating the continued improvement of the economy,” Michael Poulsen, an analyst at Global Risk Management Ltd. in Middelfart, Denmark, told Bloomberg. The International Energy Agency in Paris estimates the PRC will consume 11 percent of global oil this year, compared with 21 percent for the US. The U.S. Energy Information Administration predicts that China is likely to become the world’s largest net importer of oil this year as US production of unconventional oil surges.

"Overall, therefore, we expect global oil consumption growth to slow further over the next few years, contributing to a fall in prices," said Tom Pugh, commodities economist at Capital Economics, in a report. Pugh predicts the price of Brent will fall to as low as $70 a barrel by the end of the decade.