Brent futures dipped below $111 a barrel on Thursday as supply fears eased after Libya declared an end to an oil crisis that has cut exports from the OPEC member to a trickle, although declines will be capped by concerns over Iraq.
Libya's acting Prime Minister Prime Minister Abdullah al-Thinni said the government had reached a deal with a rebel leader controlling oil ports to hand over the last two terminals and end a blockade, making around 500,000 more barrels a day of crude available for export.
Brent crudeextended the previous session's losses to fall to a three-week low, dropping 32 cents to $110.92 a barrel by 0230 GMT. U.S. oil declined 44 cents to $104.04, also sliding to a three-week low.
"Even if Libyan production comes back, it will still be only 40-50 percent of the country's full pre-crisis exports. That's a small number," said Tetsu Emori, commodity fund manager at Japan's Astmax Investment. "People are still looking at Iraq."
Oil investors are on edge over how the crisis in Iraq can be brought under control, Emori said. With limited global spare production to fill up any major disruption in shipments from OPEC's second-largest producer, prices will head higher later this month, he said.
Iraqi Prime Minister Nuri al-Maliki, who is fighting for his political life as a Sunni insurgency fractures the country, said he hoped parliament could 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 fall under the control of an al Qaeda splinter group.
Prices are also being supported by an improving demand outlook in the United States and China, the world's top two oil consumers.
U.S. crude stocks fell more than expected last week as refineries hiked output ahead of the holiday July Fourth weekend, data from the Energy Information Administration showed on Wednesday.
Crude stocksfell 3.2 million barrels compared with expectations for a decrease of 2.2 million barrels. Gasoline stocks fell 1.2 million barrels versus forecast of a 400,000-barrel gain, it said.
Broader financial markets also gained on hopes of an improved economic outlook. Asian stocks hovered at a three-year high and the dollar rose early as a series of strong economic numbers point to momentum building in the economy.
Libya's acting Prime Minister Prime Minister Abdullah al-Thinni said the government had reached a deal with a rebel leader controlling oil ports to hand over the last two terminals and end a blockade, making around 500,000 more barrels a day of crude available for export.
Brent crude
"Even if Libyan production comes back, it will still be only 40-50 percent of the country's full pre-crisis exports. That's a small number," said Tetsu Emori, commodity fund manager at Japan's Astmax Investment. "People are still looking at Iraq."
Oil investors are on edge over how the crisis in Iraq can be brought under control, Emori said. With limited global spare production to fill up any major disruption in shipments from OPEC's second-largest producer, prices will head higher later this month, he said.
Prices are also being supported by an improving demand outlook in the United States and China, the world's top two oil consumers.
U.S. crude stocks fell more than expected last week as refineries hiked output ahead of the holiday July Fourth weekend, data from the Energy Information Administration showed on Wednesday.
Crude stocks
Broader financial markets also gained on hopes of an improved economic outlook. Asian stocks hovered at a three-year high and the dollar rose early as a series of strong economic numbers point to momentum building in the economy.
