Oil prices down on Libya port deal
NEW YORK: Crude oil fell about $1 on encouraging signs for supply from Libya and Iraq, with prices headed toward the lowest close in almost three weeks despite support from a big draw in US oil inventories.
Libyan export capacity looked likely to recover by about 500,000 barrels per day as rebels blockading eastern oil ports have agreed to reopen the remaining two terminals at Es Sider and Ras Lanuf.
“Overall the fundamentals are looking a little more bearish, partly because the market believes that Libya will actually export oil,” said Phil Flynn, an analyst at the Price Futures Group in Chicago, Illinois.
Brent crude was down $1.01 a barrel at $111.28 a barrel by 12:49 p.m. EDT (1649 GMT). US light crude fell more than a dollar but bounced off its session low to trade down 86 cents at $104.48.
Oil prices pared losses after the US Energy Information Administration reported that domestic crude stocks fell by 3.2 million barrels last week, bigger than analysts’ forecast of a 2.2-million-barrel drop.
Still, both benchmarks were headed for their lowest session close since mid-June.
“The bullish inventory data was able to rally the market, then we hit resistance and the market failed,” said Bill Baruch, senior market strategist at iitrader.com in Chicago, Illinois.
There have been repeated reports that ports would reopen and production increase, but analysts said the latest developments were likely to have more impact.
US gasoline stocks fell by 1.2 million barrels, countering expectations of a 0.4-million-barrel rise, as drivers filled their gas tanks ahead of the national holiday weekend.
However, a hurricane set to hit the US East Coast over the weekend could cause people to cancel vacation plans.
Brent, the North Sea benchmark, hit a nine-month intraday high of $115.71 two weeks ago on worries that an insurgency in northern Iraq would hit oil output and exports.
Prices have fallen steadily since then as oil facilities, mostly in southern Iraq, hundreds of kilometers from the fighting, have remained in operation.
Iraq is OPEC’s second-biggest producer and exporter and pumped 3 million bpd last month, a Reuters survey showed.
“The situation is kind of ‘holding,’ for lack of a better word,” said John Kilduff, a partner at Again Capital LLC in New York.
“We’re probably less worried about an attack on the southern oil infrastructure than we have been in several weeks. Between the Kurds and the Shia central government securing the oil fields, the oil will continue to flow.”
Oil producers would struggle to cover another big oil supply outage, industry officials say, increasing the chance governments may tap strategic reserves if Iraq’s southern exports were disrupted.