Oil Steadies Above $92 on Signs of Global Growth
- Stabilisation follows a week of sharp falls
- Strong Asian and European stocks provide support
- Concerns of ample supply remain
Brent crude oil edged down but stayed above $92 a barrel on Monday after a week of sharp falls, as strong U.S. employment data and a rally in global stock markets pointed to stronger economic growth and higher demand for fuel.
Brent fell nearly 5 percent last week, its steepest decline since April 2013, as a strong U.S. dollar, weak demand and ample supply weighed on prices.
"It is no surprise to see the price stabilising after the massive sell-offs last week, but we won't see a hard price floor until OPEC indicates that it will cut production," said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt.
Brent for November was down 10 cents at $92.21 a barrel by 1355 GMT. The benchmark touched $91.48 on Friday, its lowest since June 2012. U.S. November crude was down 5 cents at $89.69 a barrel.
Tony Machacek, an oil trader at Jefferies in London, said that many traders were buying options to insure against prices falling to $80, reflecting uncertainty in the markets.
"I still believe the market is solidly in a downward trend," he added.
Oil has fallen in four of the past five weeks due to a global supply glut and the strength of the dollar, which touched a four-year high on Friday against a basket of currencies, making oil more costly for buyers using other currencies.
Asian shares advanced on Monday after upbeat U.S. jobs data on Friday eased concerns over slower global growth. Tokyo's Nikkei jumped 1.2 percent, while Hong Kong shares rose 0.3 percent, as pro-democracy activists scaled down protests. European stocks were also stronger.
But the overall trend for demand has been weak this year. London-based consultancy Energy Aspects forecasts demand growth for 2014 at around a million barrels a day below supply growth, oil analyst Virendra Chauhan told the Reuters Global Oil Forum.
Strong supply will continue to weigh on prices, said Bjarne Schieldrop, chief commodity analyst at SEB in Oslo.
"The main expectation is for a continued, very strong supply growth in the United States," he said.
Libyan output has increased rapidly since the summer, while conflict in northern Iraq has failed to dent supply. Islamic State militants have so far failed to make an impression in the country's southern oil-producing provinces.
But Islamic State fighters captured two towns in western Iraq over the weekend, and on Monday advanced towards a town in northern Syria, suggesting that current military efforts have not contained the radical group.
The Organization of the Petroleum Exporting Countries (OPEC) has not given any formal indication that it will cut supply at or before its Nov. 27 meeting.
OPEC member Saudi Arabia will maintain steady supplies to at least two Asian buyers in November, industry sources said.
The world's top crude exporter last week announced a bigger-than-expected cut in its November oil sales prices (OSPs) to Asia, indicating its willingness to keep oil markets well supplied and triggering a price slump.
Many analysts expect OPEC to cut production if the oil price approaches $90.
(By Sam Wilkin, Additional reporting by Keith Wallis in Singapore; Editing by Christopher Johnson and Pravin Char)