U.S. oil prices have dropped to a six-month low amid sluggish global demand, and the trend will likely continue, Bank of America analysts say.
October Brent crude edged up 20 cents to $102.27 a barrel early Friday. The September Brent contract, which expired on Thursday, tumbled $2 to settle at $102.01, the lowest for front-month prices since June 2013. U.S. crude fell 10 cents to $95.48 a barrel.
Economic weakness in Europe and Asia is putting a crimp on demand, and production is exploding higher in the United States.
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"We continue to see downside risks, . . . as U.S. crude oil markets will likely remain oversupplied this year and next,"
BofA analysts wrote in a commentary obtained by CNBC. "Strong shale oil production growth spells regional pipeline, refining and storage bottlenecks."
One negative factor is Europe, which risks falling back into recession.
"There's growing concern about the European economy and what that will mean for fuel demand," Gene McGillian, an analyst Tradition Energy in Stamford, Conn., told
Bloomberg.
"There are ample supplies here and throughout the Atlantic basin, which is weighing on both Brent and WTI [West Texas Intermediate]."
"The fact that prices are falling at all given all the geopolitical tension shows that there's a lot of bearish sentiment in the market," Kyle Cooper, director of research with IAF Advisors and Cypress Energy Capital Management in Houston, told Bloomberg. "It looks like the move lower will continue in the near term."
After oil prices rose in June amid concern that turmoil in the Mideast and Ukraine would shrink supply, "all of a sudden, . . . demand was essentially playing catch up," Harish Sundaresh, commodity strategist at Loomis, Sayles, told
The Wall Street Journal.
"Unless emerging-market growth picks up, we would have to look to geopolitical reasons or another form of supply disruption to balance the market."
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