Oil dips towards US$111

LONDON: Global oil prices dipped on Friday as supply worries eased, but optimism over talks to end the US government shutdown kept losses in check.

The International Energy Agency said in its monthly report on Friday that total non-OPEC supply would rise by an average of 1.7 million barrels per day in 2014, the highest annual growth since the 1970s.

The IEA, the West's energy watchdog, also said the United States would become the world's largest oil producer next year, compensating for disruption in anticipated OPEC production.

Brent oil was 45 cents lower at US$111.35 per barrel at 0915 GMT, after closing US$2.74 higher at US$111.80 on Thursday.
The benchmark was still up nearly two per cent for the week.

US crude was down US$1.26 at US$101.75 per barrel, on track for its fourth weekly decline in five weeks.

"At the moment it's one step forward, two steps back," said Carsten Fritsch, analyst at Commerzbank in Frankfurt.

"We're looking at a state of oversupply, as the IEA report showed, and that's weighing on prices."

The gap between US crude and North Sea Brent stood at US$9.63 per barrel and was on course for its widest settlement since early June.

"It looks like investors have been caught on the wrong foot and are having to scale back their positions, pushing the WTI-Brent spread wider," Fritsch said.

Signs that US President Barack Obama and Republican leaders appeared ready to end a political crisis that has shuttered much of the US government checked losses.

Republican leaders offered a plan on Thursday to extend temporarily the US government's borrowing authority, raising hopes of an end to the budget impasse that has clouded the demand outlook in the world's biggest oil consumer.

Although questions remained over whether a deal could be struck, the news sparked a big rally on Wall Street and in oil prices on Thursday, with Brent touching a four-week high of US$112 a barrel.

Lingering instability in Libya has also supported oil, after gunmen on the government payroll captured and briefly held Libyan Prime Minister Ali Zeidan on Thursday.

Oil output in Libya only recently recovered to 700,000 barrels per day after armed groups shut down pipelines and oil ports across the country.

The US Commodity Futures Trading Commission will not publish its weekly Commitment of Traders report, which was due on Friday and gives an indication of investors' positions, because of the government shutdown