ICE Brent futures head lower as supply fear disruptions ease

ICE Brent futures head lower as supply fear disruptions ease

London (Platts)--6Sep2006

ICE Brent futures moved lower Wednesday, after trading in a narrow range
Tuesday, heading towards the $67/barrel mark as crude supply disruption fears
ease and funds move to short positions.
Funds have stopped taking long positions, which had been keeping crude
above $70/barrel, allowing for a further drop in prices on bearish
sentiment.At 1120 London time (1020 GMT) October Brent traded at
$67.43/barrel, shaving 66 cents off Tuesday's settle at $68.09/barrel.
ICE WTI October was trading at $67.94/barrel, down 66 cents. 30,000 lots
have traded in Brent so far on Wednesday.
A great deal of risk premium has been eroded from the crude complex but
brokers say that there is still some premium that still has to work it's way
out as bearish sentiment continues to dominate the market.
"Iran is on the back-burner, Nigeria has taken steps to sort out it's
problems that had been effecting supply, the fighting between Israel and
Hezbollah seems a long time ago and no serious hurricane risk has emerged,"
said one London-based broker.
"It is as if all of the prop's that had been pushing this market higher
have been kicked away and despite some fund buying yesterday I still expect
more liquidations. Support is gathering around the $65/barrel level and where
normally you might expect a bounce I don't think we will see one. This market
really peaked in July with the BP Alaska shut in," he added.
Brokers also talked of the lack of support being offered to the crude
complex by product cracks with European Naphtha, gasoline and fuel oil cracks
trading at a low ebb. Europe also seems well stocked for heating oil and
gasoil, traditional winter drivers, with strong demand seen in August now
trailing away as tanks begin to fill up. One trader noted that gasoil demand
in August was 10% higher than the same time last year.
Also providing support on the downside is the refinery turnaround season
expected towards the end of September and early October with demand for crude
from refineries expected to come off as a result.

OPEC PRODUCTION
OPEC is expected to maintain the current production ceiling when
ministers meet in Vienna on September 11 and Algeria backs keeping the ceiling
unchanged, Algerian oil minister Chakib Khelil was quoted Wednesday as saying.
He told the Algerian newspaper El Khabar in an interview that there was
no question of increasing production with most members of the 11-nation
producers' club pumping at full capacity.
"As for an analysis of the current market situation, oil prices are
expected to remain at current high levels, above an average $50/barrel for the
rest of the year. As for next year, they are expected to remain high but not
at the high levels we have seen this year."
--Jonathan Davies, jonathan_davies@platts.com

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