BackBrent crude drops to lowest since June 2013 as supply risks ease
Brent crude fell $2.16 to $101.37 a barrel after notching a session low of $101.11, the lowest since 24 June, 2013
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New York: Brent crude oil sunk by more than $2 a barrel to its lowest price 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.
The Kiev military reported new successes overnight, building on a weekend breakthrough when troops raised the national flag in Luhansk, a city held by pro-Russian separatists since fighting began in April.
Crude had risen 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.
“You had a very solid run-up on Friday, probably related to geopolitical risk going into the weekend, and you have a hangover because of that," said Stephen Schork, editor of The Schork Report in Villanova, Pennsylvania.
Brent crude fell $2.16 to $101.37 a barrel by 11:46 am EDT (1546 GMT) after notching a session low of $101.11, the lowest since 24 June, 2013.
US crude for September fell $1.28 to $96.07, after touching a low of $95.81.
US crude futures prices were briefly lifted off intra-day lows on Monday by a report from industry intelligence company Genscape of “further increased activity" at CVR Refining LP’s 115,000-barrel-per-day Coffeyville, Kansas, refinery.
The Kansas department of health and environment, however, said the refinery, which was shut by a fire on 29 July, remained closed. The refinery has direct access to the Cushing, Oklahoma oil storage hub and delivery point for the US crude contract.
The September US crude contract is set to expire on Wednesday. Its premium, or backwardation, to the October contract widened to a high of $2.48, indicating supplies in the later month were expected to be more ample than in the immediate-term.
Phil Flynn, analyst at the Price Futures Group in Chicago, said Coffeyville could need additional crude as soon as it was up and running in order to make up for lost production.
He also said refineries were entering “shoulder season," a period of weak oil demand when summer driving wanes and winter has not yet begun.
In Iraq, Kurdish peshmerga fighters and Iraqi forces have pushed Islamic State militants out of Mosul dam, state television reported, while higher Libyan output threatens to compound ample supply.
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 per 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. Reuters
Alex Lawler and Jacob Pedersen also contributed to this story.
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