Oil prices drop before US supply report

2nd July 2014, Comments 0 comments

Oil prices dropped on Wednesday as dealers await the release of a US stockpiles report for clues about demand in the world's top crude consumer.

Brent North Sea crude for delivery in August dropped 57 cents to stand at $111.72 a barrel in London midday deals.

US benchmark West Texas Intermediate for August slipped 33 cents to $105.01 a barrel compared with Tuesday's close.

The market's focus is the US Energy Information Administration's weekly report on US commercial energy inventories to be released later Wednesday, analysts said.

Crude reserves are expected to have fallen 1.7 million barrels in the week ended June 27, according to analysts polled by the Wall Street Journal.

Gasoline stockpiles likely rose by 200,000 barrels, and stocks of distillates, which include heating oil and diesel, are expected to have climbed 800,000 barrels.

Despite Wednesday's losses, Singapore's United Overseas Bank (UOB) said oil prices retained support "on upbeat manufacturing data in China".

Chinese manufacturing activity expanded at its fastest pace this year in June, an official survey showed on Tuesday, in a sign that Beijing's attempts to tackle slowing growth in the world's number two economy and top energy consumer are gaining traction.

UOB said concerns are easing over a possible supply disruption in major crude producer Iraq.

Islamist militants have overrun swathes of territory in Iraq in a lightning offensive since June 9, but have so far yet to directly threaten the key oil-producing region in the country's south.

Kuwait Oil Minister Ali al-Omair on Wednesday said he expects oil prices to ease following a rise prompted by unrest in Iraq and Libya.

"Markets have witnessed a slight increase recently, but this rise will not last for long as prices will stabilise. They have already started to ease and return to normal levels," said Omair, cited by the official KUNA news agency.

He attributed recent price support to violence in Iraq and Libya, both key oil producers and exporters in the Organization of Petroleum Exporting Countries.

Omair said that the violence in Iraq, where Islamist militants launched a lightning offensive on June 9, has not impacted crude supplies.

The violence in Iraq has a direct bearing on global crude prices however because the country is the second-largest oil exporter in the 12-nation OPEC after Saudi Arabia.

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© 2014 AFP

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