SINGAPORE, Oct 20 (Reuters) – Brent crude LCOc1 edged higher on Monday, holding on to gains scored in the previous session that took it above $86 a barrel after robust U.S. data buoyed global financial markets, with a cut in Saudi-Kuwait oil output providing further support.
Abundant global oil supplies coupled with a gloomy economic outlook from Europe to China had pushed Brent to its lowest since 2010 last week, consolidating a loss of more than 25 percent since June.
However, prices recovered late last week as some investors covered short positions and Brent for December delivery LCOc1 had risen another 8 cents to $86.24 by 0654 GMT. On Friday the price had risen 2 percent, its biggest gain in more than a month.
U.S. crude CLc1 gained 33 cents to $83.08 a barrel.
A positive U.S. consumer sentiment index brought cheer to Asia’s equity markets on Monday, although the impact on oil may be short-lived. (Full Story)
“Oil markets are following the positive sentiment from equity markets,” said Ric Spooner, chief analyst at CMC Markets in Sydney.
“But it is a short-term reaction and the upside is limited as, barring any geopolitical risks, nothing much has changed in terms of fundamentals.”
Investors’ hopes that OPEC producers would cut output to support prices amid an unrelenting shale oil boom in North America have been dashed by comments and signals from Saudi Arabia, Kuwait and Iran. (Full Story) (Full Story) (Full Story)
However, production has been halted temporarily at the Saudi-Kuwait Khafji oilfield, which has output of 280,000 to 300,000 barrels per day (bpd), just over 2 percent of Saudi Arabia’s total output capacity. (Full Story)
“The shutdown was not aimed at OPEC policy and ultimately may not affect production, given spare capacity, but the current market environment makes such workovers easier,” said Adam Longson of Morgan Stanley in a note on Monday.
Longson expected OPEC production to fall from September. “Middle East sailings are set to fall sharply in the four weeks through Nov. 1.”
Investors are keeping an eye on any disruption to oil supply from geopolitical developments.
“The market is at a level where it is vulnerable to anything that is of a real threat to production,” Spooner said.
Tension mounted as Islamic State’s fight against Kurdish defenders further destabilised the Syrian border town of Kobani. (Full Story)
Traders are also concerned about uncertainty over who is in charge of Libya’s vast oil reserves, after a self-styled government controlling Tripoli announced its oil policies. (Full Story)
Libya is currently producing 800,000 bpd of oil, down more than 40 percent from its peak of 1.4 million bpd in mid-2013.