Oil Falls Towards $111 on Libya Ports Deal
Oil fell towards $111 a barrel on Wednesday, its lowest in almost three weeks, on a possible substantial recovery in Libyan exports after rebels said they would reopen two oil terminals.
Libyan rebels blockading eastern oil ports have agreed to reopen the remaining two terminals at Es Sider and Ras Lanuf. The port seizures have crippled the OPEC producer's oil industry since last summer.
If fulfilled, the deal would bring back around 500,000 barrels per day (bpd) of crude oil export capacity, although production would remain well below the total of around 1.4 million bpd.
There have been repeated reports in the past that ports would reopen and production increase, but analysts said the latest developments were likely to have more impact.
"It's the Libya effect," Hans van Cleef, senior energy economist at ABN Amro in Amsterdam, said of the drop in oil prices.
It looked as if any drop in Iraq's oil exports due to violence there could be cushioned by rising Libyan exports, he said.
Brent crude was down 76 cents a barrel at $111.53 by 1357 GMT. It was at its lowest since June 12 and down 1.5 percent so far this week, on track for its biggest weekly fall since January.
U.S. light crude fell 67 cents to $104.67 a barrel.
Brent, the North Sea benchmark, hit a nine-month intraday high of $115.71 two weeks ago on worries that a Sunni Islamist insurgency in northern Iraq would hit oil output and exports.
But prices have slipped back steadily since then as oil facilities, mostly in southern Iraq, hundreds of kilometres 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.
Analysts have even suggested that Iraq's southern oil exports, which recently hit a record high around 2.6 million bpd, could increase further.
"There haven't been many reported attacks in the south over the past few months," said Jessica Watkins, Middle East analyst at the Risk Advisory Group in London.
"I don't think there's much of an imminent risk of (Sunni insurgents) seizing key installations," she added.
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.
U.S. crude stocks fell by 876,000 barrels in the week to June 27 to 381.7 million, compared with expectations for a decrease of 2.2 million barrels, data from industry group the American Petroleum Institute showed on Tuesday.
Gasoline stocks dropped by 407,000 barrels versus forecasts of a 400,000-barrel gain. Distillate fuel stockpiles, which include diesel and heating oil, rose by 4.4 million barrels, against expectations of an 800,000-barrel gain, it said.
Investors are awaiting official data from the Energy Information Administration (EIA) due at 1430 GMT.
U.S. commercial crude oil inventories were forecast to have dropped in the week to June 27, while refined product stockpiles are likely to have risen, an expanded Reuters poll of nine analysts showed on Tuesday.
The survey forecast crude oil stocks decreased by 2.2 million barrels on average last week.
(By Christopher Johnson and Simon Falush, Additional reporting by Manash Goswami in Singapore; Editing by William Hardy and Dale Hudson)