Oil Below $98, Demand Sluggish, Ample Supply
Weak economic outlooks in Europe, China weigh; Investors look past possible OPEC output cut. Libya fighting closes refinery, cuts oil output.
Brent crude oil fell below $98 a barrel on Monday, dropping for the third session in four, as sluggish demand and ample supplies outweighed expectations of a cut in oil output from the Organization of the Petroleum Exporting Countries (OPEC).
OPEC members, many of whom need oil prices above $100 a barrel to meet budgetary needs, will review the organisation's oil output policy at its next meeting on Nov. 27.
Many analysts expect the producer group to cut output in response to a recent fall in prices, but it is not clear how much impact a supply reduction would have on the market at a time of heavy oversupply and high stocks.
Lower Libyan oil output has had little impact on prices.
November Brent was 60 cents lower at $97.79 a barrel by 1200 GMT. U.S. crude futures for October were unchanged at $92.41 a barrel, ahead of the contract's expiry at the end of Monday.
"Sentiment remains predominantly bearish given downbeat demand growth expectations and plentiful supplies," said Andrey Kryuchenkov, London-based oil and commodities strategist at Russian bank VTB Capital.
"However, I think the downside is limited," he added. "The market is very sensitive to supply jitters, given that the risk premium is gone, and judging by the reaction last week to a fresh outage in Libya and OPEC comments."
OPEC's secretary general said last week the group could cut output next year, but investors' attention has focused on the gloomy economic outlooks in Europe and China, which have curbed oil demand.
Concerns over extended stagnation in Europe, that could pull down other economies, were highlighted at the G20 meeting in Australia on Sunday.
Investors will look for clues on where demand from China, the world's second-largest economy, is heading from flash manufacturing PMI data due out on Tuesday.
In signs Western sanctions could affect Russian oil and gas production in the long run, Exxon Mobil (XOM) said on Friday it would wind down drilling in Russia's Arctic.
Oil production in Libya has fallen to 700,000 barrels per day (bpd), down nearly 20 percent from 870,000 bpd a week ago as its El Sharara oilfield and Zawiya refinery stay closed, a spokesman for the state-run National Oil Corp (NOC) said on Sunday.
Geoffrey Howard, North Africa analyst at consultancy Control Risks told Reuters Global Oil Forum on Monday that Libyan oil supplies were at risk and likely to fall in the coming weeks.
"Sustained high output levels are highly unlikely," Howard said. "All oilfields are vulnerable to politically motivated unrest," he added.
Fighting has intensified in southern Libya as soldiers and police clashed in the last few days near the country's biggest oilfield El Sharara. The field, which feeds Zawiya in the north, was shut last week because of damage to a storage facility at the refinery.
By Christopher Johnson
