Oil slips below $110 as supply worries ease
London, August 21, 2013
Brent crude oil fell below $110 a barrel on Wednesday on reports some Libyan oil exports might soon resume and on news the Seaway crude oil pipeline had shut, halting shipments from the U.S. Midwest to the Gulf Coast.
About half of Libya's more than 1.2 million barrels per day (bpd) of crude oil export capacity is out of action due to strikes and civil unrest, but officials have said some ports have reopened and more shipments could restart within days.
With the U.S. Seaway pipeline out of action, oil stocks at Cushing, Oklahoma, the delivery point for U.S. crude futures, will gradually increase, which could put pressure on prices.
Brent futures for October were down 50 cents at $109.65 a barrel by 1045 GMT. U.S. October oil was 10 cents lower at $105.01 a barrel. The September U.S. crude contract expired on Tuesday, closing down 2 percent at $104.96, its largest one-day loss in two months.
"Libya could export more oil and the Seaway news is also a negative factor," said Carsten Fritsch, senior oil analyst at Commerzbank. "If Seaway doesn't reopen by the end of the week, we will see higher crude stocks at Cushing."
The situation in Libya is volatile with conflicting reports of port activity and varying estimates of oil exports.
The head of Libya's Petroleum Facilities Guard said on Tuesday striking workers at a key oil port fired on civilians and injured at least one person. Independent confirmation of the shooting was not immediately available.
Investors also kept a wary eye on the U.S. Federal Reserve, which has said it will gradually ease back on monetary stimulus programmes that have pumped trillions of dollars into asset markets, helping boost oil prices over the last few years.
The Fed will release minutes of its latest policy meeting on Wednesday, with investors looking for clues on when it plans to taper its bond purchases.
"A lot of money has come out of the market because of uncertainty over the Fed's stimulus policy, so expect to see range-bound trading," said Carl Larry, president of Houston-based consultancy Oil Outlooks and Opinions.
Political crisis in Egypt also stoked supply worries.
Egypt is home to the Suez Canal and the Sumed pipeline, which together carry around 4.5 million bpd of oil between the Red Sea and the Mediterranean. The Egyptian army has said it will guarantee the safety of the canal and pipeline but any disruption could have a major impact on oil prices.
"Egypt is on the boil, and if this thing spins out of control you'll have alarm bells going off among other producers in the region about a potential domino effect," Larry said.
The U.S. Energy Information Administration will publish its weekly estimate of oil stocks at 10:30 a.m. EDT (1430 GMT) and is expected to say U.S. commercial crude oil and gasoline inventories dropped last week, while distillate stocks rose, an expanded Reuters poll of analysts showed. – Reuters