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The price of oil fell below $100 a barrel for the first time since
May even as the deteriorating security situation in Libya has raised
questions about whether the country can soon increase crude exports.
Benchmark U.S. crude for August delivery fell 95
cents to close at $99.96 a barrel on the New York Mercantile Exchange.
Oil is down 5 percent since the beginning of the month.
Brent crude, a benchmark for international oils
used by many U.S. refineries, fell 92 cents to close at $106.02 on the
ICE Futures exchange in London.
Prices have been falling in recent weeks as worries
about supply disruptions from Iraq eased and on the prospect of more
supplies from Libya. Weaker than expected economic data for the first
half of the year prompted the International Energy Agency and other
experts to trim their forecasts for short and medium term demand.
On Tuesday, Fed Chair Janet Yellen's remarks to
Congress on the U.S. economy strengthened the value of the U.S. dollar,
also helping to push oil lower. Because oil is priced in dollars, a
stronger dollar makes oil look comparatively more expensive - and
therefore less desirable - to holders of other currencies.
But analysts say the price of oil may not be able
to fall much further, in part because increased supplies from Libya are
far from assured. Fighting between rival militias over Tripoli
International Airport and battles in the eastern city of Benghazi are
casting doubt on plans to reopen two oil terminals that would boost the
country's crude exports by about 500,000 barrels a day. Libya now
produces around 350,000 barrels of oil a day.
"The ports in Libya might have reopened but with
such a level of insecurity in the country it is difficult to trust that
stability in exports can be sustained," said Olivier Jakob of
Petromatrix in Switzerland.
Investors will now await fresh information on U.S.
stockpiles of crude and refined products, due Wednesday from the Energy
Department. Figures for the week ending July 11 are expected to show a
draw of 3 million barrels in crude oil stocks and a build of 1.2 million
barrels in gasoline stocks, according to a survey of analysts by
Platts, the energy information arm of McGraw-Hill Cos.
