LONDON: The oil market diverged on Tuesday as traders paused for breath, one day after Brent crude hit a 16-month low under $100 on the back of ample supplies.
Brent North Sea crude for October dropped 14 cents to $100.06 per barrel nearing midday deals.
The contract had plunged on Monday under the psychological barrier of $100 to strike an intra-day low of $99.36—a level last seen on May 1, 2013.
US benchmark West Texas Intermediate (WTI) for October delivery rose 79 cents to $93.45 a barrel.
“Brent is continuing on the downward trajectory that it has followed since mid-June despite the geopolitical unrest—after all, so far these risks have had little impact on the short-term supply situation,” said Commerzbank analysts in a note.
“Indeed, the once again fragile ceasefire appears to be giving rise for the first time in months to some sense of calm in the conflict in Ukraine.
“The Iraqi parliament has confirmed the new government of Prime Minister al-Abadi, which should go some way to easing the situation there.
“In Libya too, production is recovering quickly despite ongoing fighting,” they added.
Crude futures had also fallen sharply on Monday on concerns over fragile energy demand—following weak Chinese and Japanese data—and on the back of the strengthening dollar.
Imports by China showed a surprising drop of 2.4 percent, while Japan said its economy shrank 1.8 percent on-quarter in April-June, worse than the previously estimated contraction of 1.7 percent.
The dollar has meanwhile climbed sharply following disappointing US non-farm payrolls data on Friday.
The yen also hit a six-year dollar low on Tuesday following weak Japanese growth figures and anaemic Chinese trade statistics.
“The strong dollar currently weighs heavily on market sentiment,” added Sucden analyst Myrto Sokou.
The rebounding greenback makes dollar-denominated commodities more expensive for buyers using weaker currencies. That tends to weigh on demand and prices.
Sokou added that the key $100-per-barrel level was a “crucial” level for the 12-nation Organization for Petroleum Exporting Countries (OPEC).
“The psychological level of $100 per barrels is considered to be a crucial point for the oil market,” she said.
“If crude prices continue their sharp downtrend in the coming trading sessions, we could expect an imminent response/action from OPEC members regarding the current oil production levels.”
OPEC, which holds its next scheduled production meeting in Vienna on November 27, accounts for about one third of global oil production.