US crude lost over a dollar and Brent slipped on Thursday as fears eased over export disruptions from war-ravaged Iraq, Opec's second-largest producer. "The economy is on tenterhooks and oil prices are very high," said Stephen Schork, editor of the Schork Report in Villanova, Pennsylvania. "It's getting to a point where oil is overbought."
Brent has retreated from a nine-month high set a week ago on fears that the fighting in Iraq could split the country and hurt oil exports. Iraq's southern oilfields, which produce most of the nation's 3.3 million barrels a day, remained unaffected, said Nickolay Mladenov, United Nations special envoy to Iraq. "I think you're seeing some profit-taking. The market's letting some pressure out," said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut.
US crude dropped $1.22 to $105.28 by 12:30 pm EDT (1630 GMT). Brent crude fell 63 cents to $113.37 after hitting its highest since September at $115.71 last Thursday. It traded below $110 per barrel during most of early June. US equities fell following comments by St. Louis Fed President James Bullard that interest rate increases should come sooner rather than later, taking US crude down alongside.
Insurgents and Iraqi government forces continued to fight on Wednesday for control of the country's largest refinery, the 300,000-barrel-per-day Baiji complex, and troops were airlifted to the site by helicopter. Militants attacked one of Iraq's largest air bases and seized control of several small oilfields on Wednesday as US special forces troops and intelligence analysts arrived to help Iraqi security forces counter the mounting Sunni insurgency.
Iraq's self-ruling Kurds outlined plans on Wednesday to ramp up oil exports since their forces have seized control of Iraq's main northern oilfields. Andrey Kryuchenkov, an analyst at VTB Capital, said $5 to $8 per barrel in Brent's price could be attributed to geopolitical risk and worries about the loss of Iraqi oil, and that was here to stay in the short run.
Oil output in Libya rose to 300,000 bpd after the El Feel field increased production, further pressuring prices. Michael Hewson, an analyst at CMC Markets, said disappointing US economic data in the previous session helped to cap oil prices. US consumer spending rose less than expected in May, which could prompt economists to temper their second-quarter growth forecasts.
"GDP growth was pathetic, and we shook it off yesterday, but I think it's definitely weighing on prices," said Phil Flynn, analyst with the Price Futures Group in Chicago, Illinois. On Tuesday, the US Department of Commerce ruled that some energy companies may export a variety of ultra-light oil if it has been minimally refined, in what may be a marginal loosening of a decades-old ban on selling US crude abroad. Enterprise Products Partners, one of two companies given Commerce Department approval to export condensate, said it could start exporting any time.
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