WTI trims weekly gains, Brent below $108

Oil prices remained pressured on Friday and extended losses amid Thursdays negative U.S. jobless data and IEAs report which showed rising supply in 2014 will outpace increase in demand.

On the New York Mercantile Exchange, WTI crude for August delivery traded at $104.68 per barrel at 7:21 GMT, down 0.22% on the day. Prices held in range between days high and low of $104.97 and $104.38 respectively, well below yesterdays 16-month high at $107.45 per barrel. Light, sweet crude settled 1.5% lower on Thursday, trimming its weekly advance to around 1%, after surging more than 10% during the preceding two.

Meanwhile on the ICE, Brent oil traded marked a 0.13% daily loss. Brent for August delivery stood at $107.60 per barrel at 7:22 GMT, ranging between days high and low of $107.73 and $107.04 respectively. The European benchmark eased off its three-month peak at $108.87 on Thursday, erasing its weekly advance and plunging 0.1% for the week after it settled 5.59% higher the preceding one.

West Texas intermediate lost 1.5% yesterday following IEAs report which showed rising global supply in 2014 will outpace increase in demand as non-OPEC countriess output will surge most in two decades. Negative U.S. unemployment data that showed initial jobless claims rose more than expected also weighed on prices.

David Lennox, a resource analyst at Fat Prophets in Sydney, said for Bloomberg: “Demand next year will be weak and supply can adequately cope. Investors appear to be squaring off after what has been a very good week for the market.”

U.S. data

Yesterday, the U.S. Labor Department reported that Initial Jobless Claims rose to 360 000 in the week ending July 6, a two-month high. This was well above the preceding periods revised reading of 344 000 and surpassed expectations of a drop to 340 000, spurring concern over demand in the worlds biggest consumer. Meanwhile, apart from the negative U.S. data, the dollar fell to multi-week lows following the release of Feds minutes and Ben Bernankes statement on Wednesday, which scaled back traders expectations of an earlier-than-expected deceleration of the central banks monetary stimulus. The dollar index plunged on Thursday, falling well below Tuesdays three-year high. The U.S. currency gauge erased earlier weekly gains and is now marking a 1.9% weekly decline, after settling 1.53% and 0.98% higher during the preceding two weeks.

Investors also netted profits on Thursday after a three-week rally on political turmoil in Egypt, which threatened oil transport and flows through the state-controlled Suez Canal and Suez-Mediterranean Pipeline. Oil prices were also supported by a yet another unexpectedly high fall in U.S. Crude Oil Inventories this week, marking the biggest two-week drop on record. Crude reserves decreased by 9.9 million barrels to 373.9 million in the week ending July 5, near the upper limit of the average range for this time of the year. Refineries operated at a 0.25% increased capacity, reaching 92.4%, the highest level since August. Gasoline stockpiles fell by 2.6 million barrels, or 1.2%, to 221 million, whereas forecasts pointed at an increase and are well above the upper limit of the average range. Distillate fuel stockpiles surged by 3 million barrels to 123.8 million, well above expectations.

Michael McCarthy, chief market strategist at CMC Global Markets in Sydney, said for Reuters: “We are seeing some concern that the upward momentum has reversed with last nights fall. Its a flash of short-term trading interests. Fundamentals are still supportive.”

IEA forecast

However, gains were limited as yesterdays IEA monthly report boosted a long-term bearish sentiment for oil, saying that increased output by non-OPEC countries will outpace the rise in demand. The International Energy Agency said world oil consumption will climb by 1.2 million barrels per day next year, up form 2013′s 930 000 bpd increase. Supply outside the OPEC group will jump by 1.3 million bpd, most in two decades, due to new technologies which allowed new fields in the U.S. and Canada to be exploited. This however will erode OPEC’s market share.

OPEC pumped out 30.61 million bpd in June with disruptions in Libya, Iraq and Nigeria cutting the group’s production by 370 000 bpd. The IEA said the need for OPEC crude will shrink to 29.4 million barrels per day in 2014, down from 2013′s 29.6 million bpd and 1.2 million per day below the group’s June quota.

Meanwhile, increased output from other countries apart from the U.S. and Canada is also expected to offset supply disruptions elsewhere. In 2014, North American supply is expected to surge by nearly 1 million barrels per day. Major projects in Brazil, West Chirag in Azerbaijan, the Kashagan field in Kazakhstan and new fields in the North Sea are expected to further boost global output. The IEA said: “Production could prove even higher than forecast in Russia, the United States, Canada, and Brazil, especially if prices remain at or above current levels.”

Meanwhile, the official Xinhua news agency said Chinas finance minister expects the Asian countrys economy to expand around 7% this year, below the governments official projections. China is expected to show the highest oil demand increase in 2014, adding 385 000 bpd, or 3.9%, to 10.3 million bpd. The rest of nonOECD Asia should add 325 000 bpd and the Middle East’s demand should gain 255 000 barrels per day. Top oil consumer, the U.S., will post a 0.1% drop in demand to 18.6 million bpd in 2014.