Brent crude, the benchmark for world oil prices, hit a 13 month low on August 13 before recovering to end at $104.28 a barrel. Since mid-June prices have gradually come down by more than nine percent. The most recent losses came after the International Energy Agency (IEA) earlier this week lowered its demand forecast for 2014, with weaker than expected second-quarter economic growth in developed countries and a reduction in oil stockpiling on the part of China.
The situation has been unstable, with geopolitical causes, notably the conflict in Iraq, seen as being behind a hike to a nine-month high in July, when oil prices hit $115.71 per barrel. However USA oil production growth has proved a buffer to geopolitical risk, a factor explaining why the global market appears to be over-supplied. On Wednesday, the EIA reported an increase of 1.4 million barrels in oil supplies for the week ended August 8, countering expectations that there would be a decline. Oil futures on the USA benchmark New York Mercantile Exchange, ended slightly higher at $97.59 a barrel.
According to the IEA: "The Atlantic market is currently so well supplied that incremental Libyan barrels are reportedly having a hard time finding buyers." In a report on Tuesday it said: "Oil prices seem almost eerily calm in the face of mounting geopolitical risks spanning an unusually large swathe of the oil-producing world." The IEA pointed out that that while tensions in Iraq and fighting in Ukraine continued to have an impact, other oil resources were available, including those of the USA, Libya and Saudi Arabia.
