Brent crude touched a two-week low near $111 today, down by nearly $3 on investor pessimism that economic growth will slow after Japan's earthquake and tsunami, while easing unrest in the Middle East threw the focus back onto ample oil supplies.
April Brent fell as much as 2.4 per cent to $111.16, the lowest price since February 25th. It was down $1.64 at $112.20 this morning, while US crude fell $2.15 to $99.01, after hitting an intraday low of $98.55. Brent reached a 2.5-year high of almost $120 on February 24th as civil unrest in Libya disrupted oil exports.
Japan's strongest earthquake on record on Friday shut refineries and industrial plants in the world's third-largest oil consumer. Infrastructure damage may curb demand in the near term, while reconstruction may boost use further down the line.
Expectations of higher demand for LNG, crude and fuel oil to substitute 9,700 megawatts (MW) of nuclear power capacity lost after the 8.9-magnitude quake are helping boost the value of Brent later this year relative to the prompt prices. US natural gas rose almost 1 per cent.
Police presence across cities in top oil exporter Saudi Arabia sputtered planned "day of rage" protests on Friday, while in neighbouring Bahrain the crown prince offered assurances of national dialogue yesterday after police fired tear gas and water cannon at demonstrators.
Arab countries appealed to the United Nations on Saturday to impose a no-fly zone on Libya as government troops backed by warplanes fought to drive rebels from remaining strongholds in western Libya.
Muammar Gadafy's troops battled rebel fighters for control of the strategic Libyan oil town of Brega yesterday, as France promised to push harder for a UN-backed no-fly zone over what used to be Africa's third-largest oil producer, before a civil war slashed output by at least two-thirds.
Saudi Arabia and other Opec producers have increased production, partly to offset the drop in Libyan exports.
A hydrogen explosion rocked the earthquake-stricken nuclear plant in Japan where authorities have been working desperately to avert a meltdown.
Japanese carmakers and electronics firms shut key factories, underscoring the challenge facing the government as it rushes to limit the economic blow.
Japanese stocks fell 7.5 per cent, posting the biggest daily decline since October 2008, and bond yields rose on Monday as investors expected the earthquake and tsunami that devastated the country's northeast to take an economic toll and require heavy government borrowing.
Japan will move quickly to import more liquefied natural gas (LNG) and low-sulphur fuels to generate power at thermal plants and replace nuclear electricity supplies.
The country's demand for fuel oil at power plants was set to rise, while in the longer-term consumption of distillates including diesel would also increase for reconstruction.
The front of the Brent forward curve was flat and close to reverting to contango, a structure denoting reduced urgency for supplies in the near term compared to future ones, after front-month Brent commanded a premium of as much as 50 cents over the second month as recently as mid-February.
Speculators' net-long positions in US crude futures rose by 2 per cent to hit a new record high in the week to March 8th, the Commodity Futures Trading Commission said on Friday, the third consecutive peak.
Reuters
