Brent falls as Ukraine election tensions ease
Poroshenko promised to bring peace to a united Ukraine after winning over half of the vote
Brent prices eased at the end of May as pro-European candidate Petro Poroshenko swept to victory in Ukraine’s first presidential elections since Russia’s annexation of Crimea. Poroshenko vowed to end violence and bring peace to a united Ukraine after winning around 54% of the vote.
Brent was trading around $110.25 per barrel (/b) on 27 May, down from just under $111/b on 22 May. WTI also fell by 17 cents on the morning of 26 May, to $104.18/b, ahead of a US public holiday.
Oil prices were supported in April by ongoing tensions between Russia and Ukraine, supply outages in Libya and northern Iraq and increased crude buying from refiners ahead of seasonal maintenance periods. These factors combined to offset seasonally weaker demand.
China added further pressure to crude prices after it announced plans to cut its energy consumption by 3.9% this year. The International Energy Agency (IEA) reported a sharp rise in Chinese crude oil imports in April which it said is not matched by rises in demand. Provisional IEA data showed Chinese oil imports reached an all-time high of 6.81 million b/d in April, with a 1.4m barrel stock build in that month alone. Chinese crude stock building would temporarily support oil markets and keep stocks from rising elsewhere, it said.
The IEA forecasts total global oil demand will increase by a marginal 1.32m b/d this year, reaching 92.8m b/d.
Bank of America Merrill Lynch said in a 27 May note it expects crude prices to fall moderately in 2014 as the market moves from being relatively balanced to slightly oversupplied. The bank expects Brent prices to average $106/b in 2014 and $103/b next year.
It added US crude oil markets will likely remain oversupplied next year as strong shale oil production growth will continue to create regional pipeline, refining and storage bottlenecks. The bank forecasts average WTI prices of $94/b in 2014 and $91 next year.