GO
Loading...

UPDATE 4-Brent sinks to four-month low on ample supply, Iran talks

Peg Mackey
Thursday, 7 Nov 2013 | 6:11 AM ET

* West seeks first-step deal with Iran in Geneva talks

* Iran says deal possible "if everybody tries their best"

* U.S. oil product stocks drop more than forecast-EIA

* Coming up: U.S. advance Q3 GDP; 1330 GMT

(Adds quote, updates prices)

LONDON, Nov 7 (Reuters) - Brent crude fell towards $104 a barrel on Thursday to a fresh four month low as plentiful supplies and continued progress in talks between Iran and the West over Tehran's disputed nuclear programme weighed on prices.

Investors are also awaiting the outcome of the European Central Bank's policy meeting and U.S. third-quarter GDP numbers to gauge the developed nations' oil demand outlook.

Brent was down 89 cents at $104.35 a barrel by 1049 GMT. U.S. oil, drawing support from a sharp drop in oil product stockpiles, rose 25 cents at $95.05 a barrel.

"A combination of bearish factors is pressuring the price: most importantly, there is overwhelming global supply with additional OPEC capacity expected before the end of the year," Andrey Kryuchenkov of VTB Capital said.

"A stronger dollar isn't helping either."

Gains in the U.S. currency make dollar-denominated crude more expensive for buyers outside the United States and are negative for oil demand.

World powers will seek to hammer out a breakthrough deal with Iran to start resolving a decade-old dispute over its nuclear programme in two-day talks that begin on Thursday.

Although both sides say an agreement is far from certain, Iran's Foreign Minister Mohammad Javad Zarif said a deal is possible "if everybody tries their best".

Investors are also awaiting U.S. nonfarm payrolls data on Friday to gauge when the Federal Reserve might begin winding down its $85 billion-a-month bond-buying programme.

A roll-back would boost the dollar, making dollar-denominated assets more expensive for holders of other currencies.

Before that, markets will look to the first reading of U.S. third-quarter GDP later on Thursday. Economists in a Reuters survey forecast a 2.0 percent annualised rate of growth compared with 2.5 percent in the second quarter.

Data on Wednesday showed the euro zone's economic recovery lost a little momentum last month, making the U.S. numbers all the more crucial to gauge the demand outlook.

Demand for petrol in the world's top oil consumer last week was at its highest for this time of the year since 2010, according to weekly data from the U.S. Energy Information Administration (EIA).

U.S. gasoline stocks fell 3.8 million barrels, much larger than the 300,000-barrel draw analysts had expected, EIA figures showed.

The steep drawdowns in oil product stockpiles overshadowed a rise in crude inventories to 385 million barrels in the week ending Nov. 1, the largest seven-week build since May 2012.

"The strong demand for U.S. oil products was particularly remarkable; this made a major contribution to the destocking and sparked hopes that U.S. oil demand might be recovering," said a Commerzbank research note.

(Additional reporting by Manash Goswami in Singapore; editing by Dale Hudson and Keiron Henderson)