Oil prices fall as Libya resumes exports
NEW YORK -- Oil futures fell slightly after Libya said its oil production was rising following disruptions last week, offsetting positive economic data in the U.S., China and Europe.
Light, sweet crude for September delivery declined 4 cents to $106.90 a barrel on the New York Mercantile Exchange. Earlier Monday, oil prices declined before rising slightly and then falling again by midday. Brent crude on ICE Futures Europe was down 22 cents, at $108.73 a barrel.
Traders were focused on unrest in Libya as Deputy Oil Minister Omar Shakmak told The Wall Street Journal that oil production had risen to 700,000 bopd, close to half the normal level and an improvement from last week.
The improvement comes as the key oil ports of Es Sider, Ras Lanuf and Zueitina in eastern Libya have been blocked for at least a week by protesters. The blockages disrupted oil exports from the North African country, which had seen output surge to 1.5 MMbopd following a shutdown during its 2011 civil war.
Oil prices, though down for two straight trading sessions, have been lifted recently by a sharp decline in Libya's exports. Last week, Prime Minister Ali Zeidan said Libya's oil output fell by 70%.
The recent sharp decline in Libya's oil exports and other disruptions in the Middle East "have been what's supporting the oil market," said Andy Lipow, president of Lipow Oil Associates, a Houston consulting firm.
The Libyan export resumption overshadowed positive economic data, which typically boosts oil demand. Earlier Monday, the Institute for Supply Management reported a better-than-expected reading on U.S. service-sector business activity.
The ISM said its non-manufacturing purchasing managers' index increased to 56.0 in July from 52.2 in June. The reading followed news this weekend that China reported some resilience in its own services sector.
The country's Federation of Logistics and Purchasing said the official nonmanufacturing Purchasing Managers' Index rose to 54.1 in July from 53.9 in June. A reading above 50 indicates expansion.
In a note to clients, Dominick Chirichella, an analyst at the Energy Management Institute, wrote, "the market seems to be once again changing its sentiment back to one that views China's economy as starting to stabilize and even possibly growing again."
He said, "with China representing about 40 to 50% of the oil consumption growth any improvement in China's economy is almost certain to result in further increases in oil consumption."
Separately, the monthly services purchasing managers index for the U.K. rose to 60.2 in July from 56.9 in June. The index posted its seventh month of growth and reached its highest level since December 2006.
Oil prices fell Friday after the U.S. Labor Department reported weaker-than-expected jobs data. The news spurred a pullback in crude following indications earlier in the week that the Federal Reserve would continue its $85 billion-a-month bond-buying program.
Analysts say the stimulus measure, designed to give the U.S. economy a jolt, has helped crude prices by weakening the dollar, making oil cheaper to buy using other currencies.
Elsewhere in the oil market Monday, front-month September reformulated gasoline blendstock, or RBOB, recently fell 2.88 cents, or 1%, to $2.9659 a gallon. September heating oil declined 1.14 cents, or 0.4%, to $3.0600 a gallon.
Dow Jones Newswires