Oil Slips To $106 On Increased Supply, Low Demand

Brent crude oil slipped to around $106 a barrel on Thursday as higher OPEC output and disappointing demand in the United States outweighed tensions in the Middle East, Africa and Ukraine.

OPEC pumped more oil in July than in June despite concerns that unrest in Africa and the Middle East could hurt production, a Reuters survey showed.

Gasoline stockpiles rose in the United States even though it is the peak driving season, raising concern over the outlook for demand in the world’s largest oil consumer.

Brent crude for September delivery fell 40 cents to $106.11 a barrel by 1040 GMT. Brent has dropped more than 5 percent in July and is on track to post its biggest monthly loss since April 2013.

U.S. crude futures for September delivery dropped 75 cents to $99.52 a barrel, putting the contract on course for a 5.6 percent fall on the month, the biggest since October.

“It (falling prices) clearly indicates that there is ample supply,” Hans van Cleef, senior energy economist at ABN Amro, told the Reuters Global Oil Forum.

The U.S. contract hit a two-week low of $99.16 during the session after Energy Information Administration (EIA) data showed that U.S. gasoline and distillate stockpiles rose despite a bigger-than-expected drop for crude.

Crude supply from the United States is increasing as exports reached 288,000 barrels per day in May, the highest since April 1999, EIA data showed.

The dollar held just below a 10-month peak against a basket of currencies after soaring on strong U.S. economic growth data. A stronger greenback raises the cost of investing in oil for holders of other currencies.

Oil prices have eased after hitting multi-month highs in June because of political tensions in the Middle East, Africa and Europe.

But traders are watching how sanctions on Russia over Ukraine will affect its oil exports.

“Russia needs strong foreign investment in its energy sector to be able to maintain, or even expand, its oil and gas production in the longer term,” van Cleef said.