Oil near its low for the year despite turmoil

NEW YORK -- The oil market has lost its jitters.

Some regions around the world are seeing the type of unrest that in the past sent oil prices soaring. Yet oil is down about $15 since midsummer and near its low for the year.

Even with escalating violence in Iraq, OPEC's second largest exporter, and multiple rounds of sanctions by Western nations against Russia, the biggest exporter outside of OPEC, oil keeps on flowing. The major exporting nations continue to ship their crude, and production in the U.S. and Canada continues to grow.

At the same time, demand from China and Europe isn't growing as much as expected, leaving more oil on the market than predicted.

"Demand has really dropped off globally, and continues to be revised downward," said Judith Dwarkin, chief energy economist at ITG Investment Research. "And there's plentiful supply."

Oil rose slightly Tuesday to close at $91.56. Before this week, the last time oil was at these levels was January. For the year, oil has averaged $99.80 per barrel. The price reached $107.26 in June at the peak of concerns over the insurgency in Iraq, but it soon retreated when it became clear Iraq's huge southern oil fields weren't threatened.

Some of the decline is likely because of a seasonal lull in demand. Driving slows dramatically throughout much of the Northern Hemisphere as summer wanes. If there are no hurricanes or other disruptions to oil supplies, prices typically fall and languish into the winter.

But the global economy is a factor as well. The International Energy Agency, which represents oil-importing nations, said earlier this month that crude demand has slowed at a "remarkable" pace because of economic slowdowns in Europe and China.

As a result, the agency has reduced its forecast for growth of global demand by 100,000 barrels per day for both this year and next year. Global demand is now expected to grow by 900,000 barrels per day to 92.6 million barrels per day this year, then rise by 1.2 million barrels per day next year.

Just the rise in U.S. production is enough to meet that demand growth. The U.S. Energy Department estimates the U.S. is on track to grow crude production by 1.1 million barrels per day this year and another 1 million barrels per day next year.

Oswald Clint, an oil analyst at Bernstein Research, does not expect oil prices to fall further, however, or even remain at these lower levels for long. He predicts that demand will rise in response to the lower prices.

He also expects some supply to come off the market. Oil producers might cut back output at some of their more expensive fields, while OPEC countries could cut production in hopes of keeping oil prices high.

Earlier this month the secretary general of the Organization of Petroleum Exporting Countries, which supplies 40 percent of the world's crude, said it may need to lower production targets for next year.

Clint notes that the price of global oil for delivery in future months is higher than oil priced for delivery next month, suggesting that prices are indeed set to rise.

Brent crude, a key international benchmark, closed at $96.85 in London. The contract for August 2015 finished at $100.06.

"The long-term trajectory is upward," he wrote, and the oil price pullback is "a buying opportunity within a dramatically undervalued energy space."

Jonathan Fahey can be reached at http://twitter.com/JonathanFahey.