Brent Could Break $100 as Supply Weighs

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Benchmark oil prices will likely extend losses this week - with some forecasters predicting Brent crude may breach $100 a barrel - as U.S. fuel supplies build and demand stays soft, according to CNBC's latest oil sentiment survey.

Further negative factors likely to keep oil prices tame this week include evidence of further slowing in China - the second-largest global economy - fears of pullback in U.S. stock markets and lingering strength in the U.S. dollar, traders and analysts said.

Oil prices rose on Tuesday - following the worst weekly performance in five weeks - after a May reading for U.S. consumer confidence hit a more than 5-year high. Crude oil's benchmark Brent grade from Europe's North Sea closed up 1.6 percent at $104.23 a barrel. U.S. crude settled nearly 1 percent higher at $95.01.

Despite Tuesday's bounce, many believe oil should be priced far lower to reflect the current supply overhang and weaker demand.

"Combined with record production, the shale oil boom and record inventories, why WTI (West Texas Intermediate, the crude oil grade underlying U.S. futures) remains so firm is becoming one of the great mysteries of life for us," wrote Andrew Su, CEO of Compass Global Markets in a note on Wednesday.

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A test of support at $88.00 is "well overdue," Su said this week.

Nine out of 11 respondents, or about 82 percent, expect prices to fall this week. Phil Flynn at PRICE Futures Group expects U.S. crude futures to trade towards the lower end of their range. "$88 here we come."

Excel Futures' Mark Waggoner said Brent crude could break $100 within two weeks as the U.S. dollar tests a "breakout point."

The move in Brent crude below triple digits may come as soon as this week, UBS's Dominic Schnider told "Squawk Box" on Tuesday. "There's been a counter-seasonal build in U.S. gasoline stocks - short-term supply is looking favorable," he said.

Markets largely seem to be discounting Friday's ministerial meeting of the Organization of Petroleum Exporting Countries. OPEC is expected to keep its production ceiling unchanged at 30 million barrels a day although Iran and Venezuela may press the case for production cuts to shore up the oil price to help governments there support social programs.

"We anticipate that OPEC will stick with its official production target of 30 million barrels per day," Eugen Weinberg, Commerzbank's Head of Commodity Research, wrote in a report on May 27.

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"Saudi Arabia and the other Arab Gulf states see no reason for the moment to comply with the demands of individual OPEC states to implement measures aimed at shoring up prices. Thus the oversupply on the oil market will remain in place for the time being."

Greg Priddy, Director, Global Oil at Eurasia Group also expected OPEC to leave its headline production target unchanged: "With Brent relatively stable for the moment in the range preferred by the Saudis, and the normal seasonal refiner demand peak in Q3, there will be no impetus toward a consensus for a 'headline' cut to OPEC's group production target.

However, Saudi Arabia could cut production in the fourth-quarter "independent of any OPEC headline cuts, repeating the pattern of the Q4 2012 cut which began right before the December OPEC meeting," Priddy added.