London: Brent crude futures fell below $111 a barrel on Thursday as supply fears began to ease after Libya declared an end to an oil crisis that has slashed exports from the OPEC member.
Libya’s government said it had reached a deal with a rebel leader controlling oil ports involving the handover of the last two terminals, potentially making an extra 500,000 barrels per day (bpd) of crude available for export.
“The market has been waiting for this. The question now is how long it will take for flows to come out,” said Ole Hansen, senior commodity strategist at Saxo Bank.
“The market has been disappointed before so after the initial sell-off yesterday it is a case of wait and see.” Brent fell to a three-week low as traders took profits, dropping 51 cents to $110.73 a barrel by 1242 GMT. The selling pushed the front of the Brent futures curve into a contango of 2 cents. US oil fell by 44 cents to $104.04 a barrel, also hitting a three-week trough.
The crisis in Iraq is still providing a floor for prices, however, with industry officials and analysts saying the world’s spare production capacity would struggle to cover for another big oil outage.
Iraqi Prime Minister Nuri al-Maliki is hoping parliament will form a new government in its next session after the first collapsed in discord. Baghdad can ill afford a long delay as large swathes of the north and west have fallen under the control of an al Qaeda splinter group.
Saudi Arabia has deployed 30,000 soldiers to its border after Iraqi soldiers abandoned the area, Saudi-owned al-Arabiya television said, but Baghdad denied this and said the frontier remained under its full control.
LITTLE IMPACT The fighting has had little impact on Iraqi exports to date.
Production fell by about 170,000 bpd in June, according to a Reuters survey, with southern exports affected by technical issues.
“Oil exports from southern Iraq dropped in late June, but this was due to maintenance and expansion work at an oil terminal near Basra,” said Carsten Fritsch, an oil analyst at Commerzbank in Frankfurt. “That means the drop will be temporary and exports should rise in coming months.” On the demand side the latest data from the United States, one of the world’s top oil consumers, proved encouraging with the US unemployment rate falling near to a six-year low of 6.1 per cent.
Non-farm payrolls increased by 288,000 jobs in June, the Labor Department said on Thursday, effectively dispelling fears about the economy’s health.
US crude stocks also fell by more than expected last week as refineries increased output before the July 4 holiday weekend, data from the Energy Information Administration showed on Wednesday.
