The price of oil fell below US$100 a barrel for the first time since May even as the deteriorating security situation in Libya has raised questions about whether the North African country can soon increase crude exports.
Benchmark West Texas Intermediate crude for August delivery fell 95 cents to close at US$99.96 a barrel on the New York Mercantile Exchange. Oil is down five per cent since the beginning of the month.
Brent crude, a benchmark for international oils used by many U.S. refineries, fell 92 cents to close at US$106.02 on the ICE Futures exchange in London.
Prices have been falling in recent weeks as worries about supply disruptions from Iraq eased and on the prospect of more supplies from Libya. Meanwhile, weaker than expected economic data for the first half of the year prompted the International Energy Agency and other experts to trim their forecasts for short- and medium-term demand.
On Tuesday, Fed chair Janet Yellen’s remarks to Congress on the U.S. economy strengthened the value of the U.S. dollar, which also helped push oil lower. Because oil is priced in dollars, a stronger dollar makes oil look comparatively more expensive — and therefore less desirable — to holders of other currencies.
But analysts say the price of oil may not be able to fall much further, in part because increased supplies from Libya are far from assured. Fighting between rival militias over Tripoli International Airport and battles in the eastern city of Benghazi are casting doubt on plans to reopen two oil terminals that would boost the country’s crude exports by about 500,000 barrels a day. Libya now produces around 350,000 barrels of oil a day.
“The ports in Libya might have reopened but with such a level of insecurity in the country it is difficult to trust that stability in exports can be sustained,” said Olivier Jakob of Petromatrix in Switzerland.
Investors will now await fresh information on U.S. stockpiles of crude and refined products, due Wednesday from the Energy Department. Figures for the week ended July 11 are expected to show a draw of three million barrels in crude oil stocks and a build of 1.2 million barrels in gasoline stocks, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.
In other Nymex trading, wholesale gasoline fell 2.6 cents to close at US$2.899 a U.S. gallon (3.79 litres), heating oil shed 1.7 cents to close at US$2.856 a gallon and natural gas slipped 2.2 cents to close at US$4.097 per 1,000 cubic feet.