Brent Prices Still Stifled By Oversupply

Brent crude oil made its way towards $105 on Wednesday morning after falling to a nine-month low on Tuesday as soft global demand weighed on prices. The commodity traded at $104.82 at 6:20 GMT following the release of US inventory data which showed a larger than expected drop.

The American Petroleum Institute released a report showing that US crude inventories had fallen 5.5 million barrels last week, compared to analysts’ expectations of a 1.7 million barrel drop. Now, all eyes are on the Energy Information Administration’s version of the report, due out later in the day on Wednesday.

Though US economic data this week has been pointing to better oil demand in the number one oil consuming nation, it hasn’t been enough to convince markets that global demand will increase enough to cover the current oversupply. With China still struggling and the Eurozone’s recovery losing momentum, many see supply outpacing demand for some time in the future.

Meanwhile, Brent has been relatively unaffected by instability across the globe as conflicts in the Middle East, Africa and Eastern Europe continue to worsen. CNBC reported that Moscow announced that it was planning to help Iran sell its crude, but withdrew the statement quickly afterward. Both Russian and Iranian oil exports are heavily sanctioned by the West, keeping some of their crude from the market.

Also troubling is the spiraling conflict in Iraq, where Islamist militants are expanding their stronghold in the north of the country. On Tuesday, Iranian officials said they are working to find a new leader for Iraq as they believe current Prime Minister Nuri al-Maliki is unable to deal effectively with the uprising.