By Christopher Johnson / Reuters
LONDON: Oil prices fell on Monday, snapping four days of gains as worries over supplies from the Middle East eased and investors focused on the health of the global economy and fuel demand.
Tension between Iran and the West over Tehran’s nuclear program has raised fears this year of a disruption to oil supplies from the Mideast Gulf but talks on the dispute are due to start soon, calming fears of an immediate crisis.
European economies are either contracting or stalled and there are increasing doubts whether the US Federal Reserve will maintain its loose monetary policy, which has been a major support for growth.
Brent crude oil futures for April fell more than $1 per barrel to a low of $124.76, down $1.22, before recovering a little trade around $124.98 by 1045 GMT. US crude dropped to an intra-day low of $106.38, down $1.02.
“Evidently investors are beginning to feel that the oil price has reached its upper limit and are taking profits while they can,” said Carsten Fritsch, commodity analyst at Commerzbank in Frankfurt.
“With less emphasis on Iran and the Middle East, the focus is shifting back on to the fundamentals of oil supply and demand,” Fritsch added.
Signs the US economy is regaining strength buoyed the dollar on Monday but shares and commodities gave up some recent gains as investors fretted about a possible slowdown in Asia and Europe’s struggle with big debts and scant growth.
China’s weak export data released over the weekend, showing a record monthly trade deficit for February, set the early tone in risk asset markets, coupled with recent numbers showing falling inflation, softer retail sales and lower industrial output than expected in the world’s second largest economy.
China posted its largest trade deficit in at least a decade, fanning concerns of lower fuel demand in the world’s second largest economy.
While the deficit raised questions over the global economy’s appetite for its goods, China’s crude imports and implied oil demand reached record levels in February.
Speculators cut their net long positions in US crude oil futures and options positions in the week to March 6 for the first time in five weeks as prices fell, data from the US Commodity Futures Trading Commission (CFTC) showed on Friday.
Brent rose 1.88 percent last week in its sixth weekly rise in seven, after Greece averted an immediate default while US employment data improved, strengthening prospects of better fuel demand in the world’s largest oil user.
“Western Europe seems to be swinging into a positive trend, with Greek austerity measures in place and the largest sovereign debt swap in history being all but finalized,” said Stephen Schork, editor of the Schork Report in Villanova, Pennsylvania.
Investors are still spooked by supply concerns stemming from Iran’s dispute with the West over its nuclear program, on top of lower output from Syria, South Sudan and Yemen.
The chairman of the US Senate Armed Services Committee said on Friday that an international naval blockade of Iranian oil exports should be considered before any resort to air strikes against the country’s disputed nuclear program.
OPEC pumped the most oil in more than three years in February but oil prices have surged more than 8 percent this year, raising concerns that expensive oil could hurt global economic growth.
Kuwait’s oil minister expressed similar worries on Sunday, saying that current world oil prices are not justified. –Additional reporting by Florance Tan in Singapore