Uncertainty and geopolitical risks on the Ukrainian and Russian border, violence in the Gaza strip and Iraq’s sectarian civil war should be pressuring oil’s supply outlook However, soft oil demand has dampened on oil prices and related exchange traded funds.
The United States Brent Oil Fund (NYSEArca: BNO) decreased 2.1% Thursday and touched a 13-month intra-day low Wednesday. Meanwhile, the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate oil futures, fell 1.9% Thursday and is now trading about 0.2% below its 200-day simple moving average.
Brent crud oil futures were hovering around $102.2 per barrel and WTI crude oil was trading at $96.1 per barrel on Thursday.
Oil futures took a hit earlier this week after the International Energy Agency projected lower oil demand for 2014, pointing to lower-than-expected second quarter growth in developed economies and a decline in Chinese inventories, the Wall Street Journal reports.
Market observers pointed out that cargoes of West African crude had trouble finding buyers in Europe and the U.S., a sign of diminished demand.
“It’s a well-supplied market at this stage of the game,” Roland Austrup, chief executive of Integrated Managed Futures Corp, said in the article.
Supply does not seem to be an issue. Libya’s Ras Lanuf terminal opened its ports for oil shipments Wednesday. Fighting in Iraq have been far away from the oil fields. Additionally, Western sanctions on Russia have largely avoided the large oil sector. [Brent Oil ETF Faces Headwinds]