Oil eases, supply build calms Iraq fears

Oil prices eased on Wednesday as a modest increase in US crude stocks offset the impact of sabotage attacks that have crippled Iraqi exports.
US light crude shed four cents to $37.15 a barrel, while London's Brent crude lost three cents to $35.00.
Prices rose earlier in the day after attacks this week on pipelines that feed Iraq's only export terminals, but the rally lost steam following US government inventory data.
The data showed US crude stocks had risen last week by 800,000 barrels, taking inventories to a level nearly seven percent above the same time a year ago.
Analysts said the market was struggling to hold rallies after a series of inventory builds in recent weeks and as Opec's promises to deliver more oil have eased concerns about supply tightness.
Gasoline stocks, however, fell by 500,000 barrels and still lag year-ago levels by around one percent.
"The perception of oil availability is a bit simplistic," Barclays Capital wrote in a note. "Crude oil is available for the moment, but bottlenecks mean that oil product markets remain extremely tight."
Analysts also said that the limited market reaction belied the seriousness of the attacks in Iraq, which have halted exports that had been running at more than 1.6 million barrels per day and have left almost no room for manoeuvre in the world supply chain.
"Iraq's exports were about 1.6 million barrels a day, that's what I guess the world's spare capacity to be at the moment. So there's no fat left, there's no room for error, accident or more attacks," said David Thurtell at Commonwealth Bank of Australia.
Independent engineers familiar with the pipeline network in Iraq said it would take at least one week to repair the damage, while an Iraqi oil industry source said he hoped one of the two damaged pipelines could be repaired "soon" to allow a limited flow of exports.
Speaking in Washington, Qatari Oil Minister Abdullah al-Attiyah told Reuters in an interview that he supported Opec's plan to boost its official production quota, despite weaker oil prices.
"We support this very strongly and we think this is a very strong message to our consumers," Attiyah said.
Asked if Opec's entire 2.5 million bpd increase was still necessary, Attiyah said, "Yes, I think it is still needed."
The Organisation of the Petroleum Exporting Countries earlier this month decided to raise formal output quotas by two million barrels per day from July 1 and to provide another 500,000 bpd from August 1. The cartel meets again on July 21.
Just before Opec's announcement that it would increase supplies, US crude prices hit a 21-year-high of $42.45 a barrel on June 2.