July 11 (Bloomberg) -- West Texas Intermediate dropped below $101 a barrel and Brent tumbled to a three-month low as supply risks eased in Iraq and Libya while stockpiles rose at Cushing, Oklahoma, the U.S. benchmark’s delivery point.
WTI and Brent are poised for their third weekly declines. Kurdish forces took over the Bai Hassan and Kirkuk oilfields today, Iraq’s Oil Ministry said in a statement. Libya’s supply rose as the Sharara field resumed output and two oil-export terminals reopened. Cushing stockpiles gained 447,000 barrels last week, U.S. government data show.
“The barrels from Iraq are still flowing and it now looks like Libyan production is coming back after dropping to nearly nil,” Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania, said by phone. “Prices rose on speculation the flow of Iraqi crude would drop with the rise in violence and that guess turned out to be wrong.”
WTI for August delivery dropped $1.97, or 1.9 percent, to $100.96 a barrel at 1:16 p.m. on the New York Mercantile Exchange. Futures touched $100.87, the lowest intraday level since May 13. Prices are down 3 percent this week. The volume of all futures traded was 5 percent below the 100-day average for the time of day.
Brent for August settlement slid $2.10, or 1.9 percent, to $106.57 a barrel on the London-based ICE Futures Europe exchange. Futures touched $106.54, the lowest intraday price since April 8. It is down 3.7 percent this week. Volumes were almost double the 100-day average.
The European benchmark crude traded at a $5.61 premium to WTI, down from $5.74 at yesterday’s close.
The Kurds’ Peshmerga forces told workers from the state-run North Oil Co. to either leave or work under the Kurdistan Regional Government’s authority, according to the Iraqi Oil Ministry statement.
“The Kurds have signaled their intentions to start moving Kirkuk oil through their pipeline network,” Richard Mallinson, an analyst at consultant Energy Aspects Ltd., said by e-mail.
Shipments from Iraq’s southern region should recover this month to about 2.6 million barrels a day, compared with 2.42 million in June, barring technical problems, the International Energy Agency said today. Production in the Kurdistan region of northern Iraq surged by more than 50 percent to 360,000 barrels a day last month as more oil was shipped for export, it said.
“The Kurds have taken over more fields in northern Iraq, which could lead to an increase in exports,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. “This, coupled with the recent progress in Libya, has improved the supply situation for consumers. The outlook has moved from a potential shortfall to oversupply.”
Libya, which has Africa’s biggest crude reserves, was producing 350,000 barrels a day yesterday, more than double output about a month ago, according to Mohamed Elharari, a spokesman at National Oil Corp.
Rebels seeking self-rule in Libya’s east surrendered the Es Sider and Ras Lanuf terminals last week to end a yearlong blockade. The Sharara pipeline restarted on July 8, allowing the 340,000 barrel-a-day field to resume production. Libya is currently the smallest producer in the Organization of Petroleum Exporting Countries.
Cushing crude inventories climbed to 20.9 million barrels in the week ended July 4, the Energy Information Administration reported on July 9. Supplies nationwide dropped by 2.4 million barrels to 382.6 million.
Stockpiles of gasoline expanded by 579,000 barrels to 214.3 million last week, the EIA said. Supplies of distillate fuel, a category that includes diesel and heating oil, rose by 227,000 barrels to 121.8 million, the highest level since January.
Gasoline for August delivery dropped 4.47 cents, or 1.5 percent, to $2.9129 a gallon in New York. Futures reached $2.903, the lowest since May 12.
Diesel for August delivery slipped 2.38 cents, or 0.8 percent, to $2.8695.
“Prices were just too high for too long,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The supply balance is starting to reassert itself in the market.”
Global oil demand will rise at the fastest pace in five years in 2015 as China leads gains in emerging economies, the IEA said in its first monthly report to assess 2015. World oil consumption will increase next year by 1.4 million barrels a day, higher than an increase of 1.2 million a day in supplies from outside OPEC, the agency said.