Brent crude slipped below $110 a barrel on Tuesday, trading close to its lowest in nearly a month, as fears of supply disruption in Iraq eased and prospects for a rise in Libyan exports improved.
The benchmark is headed for a seventh straight session of losses, the longest-losing streak since October 2012. Brent has fallen 5 per cent since the Iraq crisis drove prices to a nine-month high of $115.71 in June.
August Brent crude was at $109.98 a barrel by 0500 GMT (10:30 a.m. in India), down 26 cents. US crude futures for August edged down 8 cents to $103.45, after settling down for the seventh session on Monday, the longest decline since December 2009.
"The market appears to be going through a process of removing the Middle East premium attached to Iraq," said Michael McCarthy, chief strategist at CMC Markets in Sydney.
"There is very unlikely to be a sweeping change in Iraq and the market is re-pricing oil on the back of that. To add to the picture, we have some technical selling kicking in."
Investors have pared down the risk that Islamic militants could advance southwards towards Baghdad and disrupt oil flow in Basra, which accounts for the bulk of Iraq's output and exports.
Still, Iraq remained in political limbo as its new parliament put off its next session for five weeks.
There could be significant downside for Brent if it falls below key support at $110, McCarthy said. The next support levels are at $108.50 and $105.50-$106.00, he said.
In Libya, preparations are underway to re-open two major oil ports in the east that were shut by protests almost a year ago. The Ras Lanuf and Es Sider ports had contributed more than a third of the OPEC producer's export capability.
Any additional Libyan barrels that may emerge would be regarded as a negative for Brent, which is light crude of similar quality to Libyan oil and competes in similar markets, BNP Paribas analysts said in a note.
The analysts remained sceptical that Libya would be able to sustain maximum throughput until the completion of maintenance on the pipelines from the oil fields to the ports, which have not been operational for eleven months.
Libya's oil output is currently 326,000 barrels per day, a spokesman for National Oil Corp (NOC) said on Monday. Oil from the western El Sharara field remained blocked by a protest at a connecting pipeline.
Investors are also awaiting weekly oil inventory data from the United States due later on Tuesday and Wednesday for clues to the demand outlook in the world's largest oil consumer.
US commercial crude oil inventories were forecast to have dropped in the week to July 4, a preliminary Reuters survey of five analysts showed on Monday. Distillate stockpiles were expected to have gained and gasoline inventories to have been unchanged.
Copyright: Thomson Reuters 2014