London: Oil headed for its third straight weekly loss on Friday as worries about supply losses in the Middle East and North Africa eased, pushing North Sea Brent crude down towards $108 a barrel.
Brent had hit a nine-month high above $115 a barrel in June as a Sunni Islamist insurgency swept across northwestern Iraq, taking control of large parts of the oil producing country and shutting down its largest refinery.
Oil has weakened over the last month but the market remains nervous about further supply shocks. The International Energy Agency (IEA) said on Friday that oil output remained at risk in several key producing regions.
“Supply risks in the Middle East and North Africa, not least in Iraq and Libya, remain extraordinarily high,” the IEA said in its monthly Oil Market Report. “Oil prices remain historically high and there is no sign of a turning of the tide just yet.” “Whether in crude or product markets, there is little room for complacency,” it added.
Brent was down 60 cents at $108.07 a barrel by 1209 GMT on Friday, while U.S. crude fell 50 cents to $102.43.
Brent was heading for a loss of around 2.3 per cent for the week, while U.S. crude futures were down around 1.5 per cent.
Despite the turmoil in Iraq and Libya, oil markets in many consuming centres now have ample supply. This has helped weaken the front of the Brent futures market, with the two front months at a discount to forward contracts.
“Libyan oil production is already on the rise, and this is reflected in the structure of the Brent market,” said Tamas Varga, oil analyst at London brokerage PVM Oil Associates.
Libya’s southern El Sharara field is boosting production and has pushed the country’s oil output to 350,000 barrels per day, a spokesman for National Oil Corp said on Thursday.
The increase in Libyan supply could drive Brent down to around $107 a barrel for September contracts, according to Andy Sommers, an analyst at EGL in Dietikon, Switzerland.
“We see the market as very close to fair value right now,” Sommers said.
Analysts say, however, that it would take months to ramp up production and more unrest is possible.
In Iraq, oil exports from the southern Basra ports continue, despite fighting in the north of the country but the situation in the country is fluid, analysts say.
Kurdish peshmerga forces took over production facilities at the two northern Iraqi oilfields Bai Hassan and Kirkuk on Friday, replacing Arab workers Kurdish personnel.
