(EnergyAsia, May 18 2012, Friday) — Battered by Europe’s economic crisis and US threats to release strategic stockpiles, crude oil prices have fallen to their lowest levels in more than six months, with US WTI slipping below US$100 a barrel and North Sea Brent hovering just above US$110 this week.
Trading in the US$90s since May 7, WTI crude dipped below US$92 a barrel yesterday to its lowest level since early November and nearly US$20 off the peak of US$110 reached on March 1.
Brent, on account of its broader international exposure, has held up better at over US$111 a barrel this week after falling through the US$120-support level on April 16.
With the Middle East out of the headlines in recent weeks, the oil markets are focusing on fears that the European Union could collapse and spark a new financial crisis similar to the one that caused a global economic recession in 2008.
In an elections year, US President Obama, who is seeking a second term in office, has also weighed in with threats to act against “speculators” and release oil from international strategic stockpiles.
Oil producers might take some comfort that Brent is expected to be well defended at US$100 to US$110 a barrel as many exploration and production projects around the world will not be viable if crude fell below this level.
Saudi Arabia, which recently raised its crude output to over 10 million b/d, has stated its support for the crude price to hold steady at the equivalent of US$100 Brent as a comfortable mid-point for oil and consuming producing countries.
At an energy conference in Australia early this week, Saudi Oil Minister Ali al-Naimi told reporters: “We need (Brent) oil price at around US$100.”
Meanwhile, OPEC’s spare crude capacity fell further to 2.38 million b/d in April compared with 2.54 million b/d in March, said the International Energy Agency (IEA). This figure, which excludes Iraq, Nigeria, Libya and Iran, is at a four-year low, and could set the stage for oil to rebound if supply disruption occurs in the politically volatile Middle East and Africa.