Oil prices down in Asian trade

AP FILE PHOTO

SINGAPORE – Oil prices eased in Asia Monday on softer US demand, but tensions in the Middle East where jihadists have declared an Islamic state straddling Iraq and Syria will likely keep prices high, analysts said.

US benchmark West Texas Intermediate for August delivery was down 26 cents at $105.48 a barrel in late-morning trade and Brent crude dropped 22 cents to $113.08.

Analysts said investors are concerned after data last week showed that consumer spending in the United States, the world’s biggest economy, rose by a mere 0.2 percent in May after flattening in April.

US jobless claims, another barometer for the giant American economy, totalled 312,000 in the week ending June 21, down just 2,000 from the week before.

As the world’s top oil consuming nation, the health of the US economy is a key influence on oil prices.

Investors were also monitoring the latest news from the oil-producing Middle East, after militants said Sunday they were establishing a caliphate covering wide areas of Iraq and Syria.

The jihadists said their caliphate wold spread from Aleppo in northern Syria to Diyala in eastern Iraq, and ordered Muslims in those areas to “obey” and pay allegiance to their new leader.

French bank BNP Paribas has raised its average oil price forecasts for 2014 and 2015 by 4-6 percent because of the developments in the Middle East.

“Geopolitics in the Middle East has recently introduced concerns about supply disruptions and, consequently, led to a sharp increase in global crude oil prices,” it said in a commentary.

While actual supply shortages have not happened yet, “the possibility of uncertainties persisting and pushing up the price higher cannot be ignored,” it added.

Other analysts have noted that Iraqi oilfields have remained operational so far.

“Insurgents are contained within northern Iraq and away from the southern oilfields,” said Desmond Chua, market analyst at CMC Markets in Singapore.