Oil slipped on Monday while the dollar strengthened and equities faltered as OPEC said the market was well supplied and inventories should build in the first half of the year.
North Sea Brent crude futures on the Intercontinental Exchange (ICE) consolidated around $6 above US crude oil futures and were not far below $100 per barrel, a level not seen since the beginning of October 2008.
US crude for February fell 40 cents to $91.14 by 1243 GMT, while ICE Brent for March lost 50 cents to $97.88.
The spread between the two futures contracts has narrowed since the ICE Brent contract for February expired on Friday. At one point on Friday, the spread between the two February contracts hit more than $8.00 a barrel, its widest in 23 months. US markets were closed for the Martin Luther King holiday and traders said that was likely to help keep oil futures within fairly narrow ranges on Monday.
Christopher Bellew, at broker Bache Commodities, said the stronger dollar had put pressure on commodities markets: “The oil price has been in an uptrend since the middle of November and now we are getting close to $100. The weather in the northern hemisphere has turned a bit milder, and the end of winter is in sight,” Bellew said.
OPEC said on Monday the world oil market remained well supplied and inventories should build in the first half of the year, even it raised its 2011 global oil demand growth forecast. The Organization of the Petroleum Exporting Countries increased its global oil demand growth forecast by 50,000 barrels per day (bpd) to 1.23 million bpd in 2011.
OPEC said in its monthly report the early onset of winter weather and an increase in investment flows into commodities were among the factors behind a recent surge in prices. The group maintained its view that consumers have enough oil. The UAE’s oil minister said fluctuating prices were not a worry: “The price keeps going up and down and all I can say for now is that we are happy,” Mohammed al-Hamli told reporters.
Al Hamli said markets were well supplied and prices reflected market conditions. But the head of the International Energy Agency, Nobua Tanaka, said on Monday oil prices were alarming at current levels and would have a negative impact.
OPEC Secretary General Abdullah al-Badri told an Austrian newspaper that, while the organization was ready to act to address supply shortages in the oil market, it would not intervene if prices were driven by speculation..
At this stage, higher output would not stem a rise in oil prices, as the climb is driven by increasing demand in emerging countries, chief executive of French oil major Total Christophe de Margerie told Reuters on Sunday. News a key Alaskan oil pipeline was about to reopen after being closed for over a week also put some extra pressure on oil prices, analysts said.
The operator of the 800-mile (1,280-km) Trans Alaska Pipeline System, which has been struggling with a leak in piping at the Prudhoe Bay intake station, said the oil artery would resume normal operations later on Monday. “We are seeing the end of exceptional support due to supply disruption on this pipe, and also the weather has become much warmer than usual both in Europe and in parts of central and eastern United States. So we are losing some support from cold temperatures,” said Christophe Barret, oil analyst at French bank Credit Agricole.
Asian shares mostly fell on Monday, led by Shanghai after China’s latest attempt to contain inflation. The benchmark Shanghai Composite Index closed down more than 3 percent. The index lost 1.7 percent last week amid fears over monetary tightening steps.