Brent Bounces from 2-year Low; U.S. Crude Rallies

Reuters

NEW YORK, Sept 11 (Reuters) - Brent crude rose and broke a string of five straight lower finishes on Thursday, climbing back from a two-year low hit after increasing supply and signs of weakening demand countered worries that conflicts in the Middle East could curb output.

Oil prices fell in tandem early in the day, but U.S. futures broke higher during morning trade in New York after triggering technical support levels. Its sharp rebound from a 16-month low lowered Brent's premium over U.S. crude <CL-LCO1=R> to less than $5 a barrel intraday, its smallest since July.

"Spread positions appeared to be liquidated in force ahead of Monday's October Brent expiry," said Jim Ritterbusch, president at Ritterbusch and Associates in Galena, Illinois.

Some traders linked the bounce in U.S. crude to news that Russia said air strikes against Islamist militants in Syria without a U.N. Security Council mandate would be an act of aggression.

"Russia's comments may slow the president's plan on getting rid of (Islamic State militants) and could keep Iraq's production slowed or in danger," said Phil Flynn, analyst at Price Futures Group in Chicago.

Others said the bounce was a sign that markets may be oversold after Brent slid more than 5 percent in six days.

"I think it is just a rally in an oversold market," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.

Brent for October rose 4 cents to settle at $98.08 a barrel. It fell as low as $96.72, its weakest since July 2012.

U.S. crude rose $1.16 to settle at $92.83 a barrel. Earlier, U.S. crude fell to $90.43, its lowest price since May 2013.

Both Brent and U.S. crude posted intraday peaks in post-settlement trading. Brent had reached $98.49 and U.S. crude $93.44 as of 3:55 p.m. EDT (1955 GMT).

Brent hit a high above $115 in June as Islamist insurgents swept across northern Iraq, taking control of several oilfields, but prices fell more than 15 percent from their highs as supply from other countries increased and demand remained tepid.

Potential threats to supply remain. President Barack Obama said on Wednesday he had authorized U.S. air strikes for the first time in Syria and more attacks in Iraq, escalating a campaign against the Islamic State militant group.

The West's energy watchdog said on Thursday that slowing global economic growth, particularly in China and Europe, had curbed oil demand severely at a time when supplies were growing steadily, particularly from North America.

"The recent slowdown in demand growth is nothing short of remarkable," the International Energy Agency (IEA) said in its monthly report, cutting its oil demand growth projections for 2014 and 2015.

The IEA expects non-OPEC supply to expand by 1.6 million barrels per day (bpd) in 2014, and by another 1.3 million bpd in 2015. (Additional reporting by Christopher Johnson in London and Keith Wallis in Singapore; editing by Dale Hudson and Keiron Henderson)



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