* U.S. oil output surged to highest level in 25 yrs in
* Global surplus oil capacity inches up in Jan, Feb -EIA
* Iran's oil fleet looks to come in from cold as exports
* Brent targets $107.85-$108.11 range -technicals
By Manash Goswami
SINGAPORE, Feb 28 Brent crude futures slipped on
Friday below $109 a barrel on expectations demand growth will
slow as severe winter weather eases, with supply worries keeping
the losses in check for now.
A severe winter chill in the United States and Europe and
supply disruption worries from the Middle East have supported
oil in the early going this year, bucking broad weakness across
other risk assets such as base metals.
But with weather patterns improving, crude prices are set to
come under pressure as demand for heating fuels eases. Global
oil supplies also look to be rising.
Brent crude fell 20 cents to $108.76 a barrel by
0519 GMT, after dropping 56 cents in the previous session. The
contract is set to end the week down 1 percent, the most in four
weeks; it has gained more than 2 percent in February.
U.S. oil dropped 46 cents to $101.94, and is set to
end the week lower, snapping six straight weeks of gains in the
longest winning spree in a year. WTI crude is up nearly 5
percent for the month.
"Oil is not reacting like other risk markets because of the
winter and geopolitical tensions in the Middle East," said
Jonathan Barratt, chief executive of commodity research firm
Barratt's Bulletin in Sydney.
"As the weather improves, some shine on that will come off.
China's slowdown will compound it even more. The markets
shouldn't be here."
The U.S. benchmark is set to slip to below $100 a barrel,
Barratt said, adding the contract should ideally hold between
$85-$90 a barrel, reflecting the current demand outlook.
Brent is at the upper end of its range now, he said, and the
lower end of the range is $103, with support seen at $106.70.
Global spare oil production capacity inched higher in
January and February as demand eased, the U.S. government said.
The Energy Information Administration said spare output
capacity, which is the amount of oil that global producers can
quickly bring on line without major investments - a key factor
in global crude prices - averaged 2.1 million barrels per day in
the last two months, or about 100,000 bpd higher than in the
previous 60 days, the EIA said.
U.S. oil production surged in 2013 to the highest level in
25 years as a boom in shale drilling boosted output, the EIA
Oil production for the year rose by nearly 1 million barrels
per day (bpd), its largest-ever annual increase, to hit an
output level of 7.46 million bpd, the highest since 1989, the
agency said in a monthly report.
Prices are also under pressure on expectations of rising
exports from Iran. The OPEC member's oil tanker fleet is gearing
up for more business, with some vessels taking to the high seas
after spending more than a year at home ports, in yet another
sign an easing in sanctions is enabling exports to pick up.
Ship tracking sources said that in recent weeks at least
three Iranian supertankers had made their first trips to Asia
after months at Iranian anchorages where they were storing
(Editing by Tom Hogue)