Oil stayed close to a six-week low below $74 a barrel on Monday as bulging US inventories and a lack of hurricane activity in the Gulf of Mexico countered aweaker dollar.
The market gained support from the weaker dollar, which makes oil cheaper for holders of other currencies, and from a firmer start to trading by European equities.
US crude for delivery in October eased 3 cents to $73.79 a barrel by 0818 GMT, having earlier risen as high as $74.30. October Brent crude was up 5 cents to $74.31.
“We’re still basically trading sideways and close to the bottom of the range, but I don’t think we’re necessarily into a nosedive,” said Christopher Bellew, a broker at Bache Commodities in London.
“Demand from developing countries such as China is supportive, and on the bearish side there’s fears of weak demand in Western economies.” Oil in New York ended last week at the lowest since early July, after prices touched an intraday low of $73.19. Prices have fallen more than 10 per cent from an August 4 high of $82.97.
Even though forecasts are for the Atlantic hurricane season to be the most active in five years, there was little imminent threat of hurricanerelated disruptions to oil output or refining in the Gulf of Mexico.
Tropical Storm Danielle formed over the mid-Atlantic on Sunday and could become a hurricane by Tuesday night, the U.S. National Hurricane Center said, but it was headed for Bermuda, posing no threat to oil and gas infrastructure in the Gulf.
“The upcoming storm in the Atlantic is expected to deviate north and will again be a storm that will not have any impact on oil assets in the US Gulf,” said Olivier Jakob, analyst at Petromatrix, in a report.
Oil this year has traded in a $64.24$87.15 range as recovering demand has been insufficient to drain ample supplies. US petroleum stocks climbed to a record since weekly records began in 1990 in the week ended August 13.
“We’ve broken some short-term support at around $74.50 and the next short-term support would be around $72,” Bellew said, referring to Brent crude.
Last week’s economic reports included data showing US jobless claims hit a nine-month high and US regional manufacturing contracted for the first time in a year, reviving fears of a double-dip recession in the world’s largest economy.
Investors’ interest in oil diminished last week. Money managers cut net long crude oil positions on the New York Mercantile Exchange, the Commodity Futures Trading Commission said on Friday.
Oil India (OIL), the stateowned Navratna oil and gas production company, has achieved a record production level of 10,000 tonnes aday. The company, which produces most of its oil from its Assam oilfields, has been producing 10,000 tonnes daily since mid-August.
The company witnessed a dip of 9.52 per cent at 0.798 million tonnes (mt) in crude oil production during the June quarter of this financial year, compared to 0.882 mt in corresponding quarter last year. Its daily average output for the quarter was 8,770 tonnes, compared to 9,910 tonnes in the January-March quarter. The company operates 30 oil and gas blocks, primarily in Assam and Andhra Pradesh.
The main reason for scaling down production during the June quarter was due to ashutdown by its top customer, Numaligarh Refinery (NRL), which accounts for over 55 per cent of its crude oil sales.
NRL was first shut down for 60 days from March 16 to upgrade units to produce higher quality Euro-III/IV compliant diesel. The shutdown, however, got extended and NRL came back to full stream only on June 27, causing OIL a production loss of 130,000 tonnes in the first quarter.
OIL had set a target of producing 0.928 million tonnes crude oil during the first quarter (April-June), but failed to achieve it due to the NRL shutdown.
There were apprehensions that with this dip in the first quarter, the company would be unable to meet its annual production target of 3.7 million tonnes. However, it is confident of achieving this target. It had produced 3.61 million tones of crude oil in 2009-10.
“This is an all-time high production for OIL, achieved as a result of various improved oil recovery and enhanced oil recovery measures apart from some minor discoveries. We are confident of recovering the loss in production and meeting the output target,” said TK Ananth Kumar, director (finance) at OIL.
Afghanistan’s mining ministry has announced that a new oil deposit with an estimated 1.8 billion barrels of crude had been discovered in the relatively peaceful north of the war-torn country. “It’s a totally new oil deposit, in a triangle between Balkh, Hairatan and huburghan“, ministry spokesman Jawad Omar said. Further assessments would be done by January, after which the deposit will be opened to tender, Omar said.