Oil price sinks to lowest since June 2013

By Ese Awhotu, with agency report

Oil price fell below $102 a barrel to its lowest in over a year on Monday as investor concerns over conflict in Ukraine and Iraq eased, and as higher Libyan oil output added to already ample supplies.

Brent crude was down $1.91 at $101.62 a barrel by 1400 GMT and fell to $101.43 intra-day, the lowest since June 26, 2013. U.S. crude fell $1.17 to $96.18, after a gain of $1.77 in the previous session

Crude jumped on Friday after the government in Kiev said its artillery had partially destroyed a Russian armoured column. While fighting between Ukrainian forces and pro-Moscow separatists continues, fears of a further escalation proved unfounded.

Reuters reports that Eugen Weinberg, analyst at Commerzbank said, “It became apparent on Friday just how nervously the market reacts to geopolitical risks. Right now, the market is just giving up all the gains it made after this news,”

In Iraq, Kurdish peshmerga fighters and Iraqi forces have pushed Islamic State militants out of Mosul dam, state television reported on Monday, while higher Libyan output threatens to compound ample supply.

“Re-opening of the biggest oil ports in the east could raise Libyan oil supplies further in the next few weeks, adding to the existing oversupply on the European market,” Commerzbank said in a report. “These developments make an imminent Brent recovery unlikely.”

Advances by militants in Iraq in June prompted a rise in oil prices, although the fighting has yet to affect oil supplies from southern oil ports, the outlet by which almost all of Iraq’s crude exports reach world markets.

Libya’s production, disrupted for months by strikes and protests, had risen to 535,000 barrels a day (bpd) on Sunday, a spokesman for the state oil company said, higher than previously reported. Still, production remains far below the 1.4 million bpd Libya pumped last year.

Adding to easing tensions and rising output in Libya, Brent has been weighed down by low demand from refineries in Europe and Asia, pushing prices into a deepening contango structure where immediate supply is cheaper than oil for later delivery.

Nonetheless, another flare-up in world political tensions or a reversal of Libya’s output gains could send prices back up, especially as seasonally higher demand approaches, analysts say.

“Sure, supplies are plentiful, but short-term output glitches in Libya or any other OPEC member state as well as sporadic violence in Iraq could still cause short-term price spikes as we head into autumn when economic activity normally picks up,” said Andrey Kryuchenkov of VTB Capital.