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UPDATE 10-Oil ends touch lower; upbeat US data offsets supply recovery
August 5, 2013 / 6:14 AM / 4 years ago

UPDATE 10-Oil ends touch lower; upbeat US data offsets supply recovery

* U.S. services sector growth accelerated in July
    * Libyan oil output improves to 700,000 bpd -oil minister
    * Euro zone retail sales decline in June
    * Coming up: APP U.S. inventory data Tuesday at 2030 GMT

 (Adds settlement prices, paragraphs 8-10; Reuters U.S. oil
inventory forecast final four paragraphs)
    By Anna Louie Sussman and Nicolas  Medina Mora Perez
    NEW YORK, Aug 5 (Reuters) - Oil ended a hair lower on Monday
after touching a four-month high last week, as data showing
growth in the U.S. services sector helped recoup earlier losses.
    Brent and U.S. crude each lost more than $1 earlier in the
session on news of attempts by Iran's new president to thaw
relations with the West, as rebounding production in Libya and
the North Sea increased the levels of readily avaiable crude.
    But both benchmarks rebounded after the Institute for Supply
Management (ISM) reported the pace of growth in the U.S.
services sector surged to a five-month high in July.
 
    "The market turned after the services number came out," said
Gene McGillian, an energy analyst at Tradition Energy in
Stamford, Connecticut. 
    "Our little selloff was a continuation of profit-taking
generated from last week's disappointing employment report and
the Libyan export terminal coming back online, but it didn't
really attract a lot of sellers."
    Brent lost 25 cents to settle at $108.70 a barrel
after earlier dropping as much as $1.40 to $107.55. 
    U.S. crude oil futures lost 38 cents to settle at
$106.56 a barrel after earlier falling to $105.70.
    The North Sea Benchmark's premium to its U.S. counterpart
widened to $2.14 per barrel after having reached intraday highs
of $2.50 and lows of $1.55 by the time of settlement.
    Gasoline prices took heavier losses, with the RBOB contract
dropping 4.5 cents, or almost 1.5 percent, to settle at $2.95
per gallon.
    
    SUPPLY GROWTH 
    Oil prices remained under pressure from news of increased
supply from Libya and the North Sea, while hints of a thawing in
Iran's relations with the West called into question crude's
geopolitical risk premium.
    Investors were cautious after newly elected Iranian
President Hassan Rouhani signalled his willingness to improve
relations with the West and end a dispute over Tehran's nuclear
program, which has resulted in sanctions cutting Iranian oil
exports by half, helping support global crude prices.
 
    Libyan Oil Minister Abdelbari al-Arusi told a news
conference on Monday that the country's oil output had improved
to around 700,000 barrels per day (bpd) and the government was
working to end protests at oil facilities. 
    Arusi said last week that strikes and protests at oil
terminals had cut output to 330,000 bpd from 1.4 million bpd
before output was disrupted. 
    "The return of Libyan production has applied pressure to the
oil complex, including products, because the loss of Libyan oil
would probably have helped exports from the United States," said
Phil Flynn, an analyst with Price Futures Group in Chicago.
    Output is also improving in the North Sea, industry sources
say, with news that the Buzzard oilfield, Britain's largest, 
was expected to begin restarting later on Monday, on schedule,
after a five-day maintenance shutdown. 
    Loss of production from key oil exporters has been an
important support for prices over the last month, with a series
of unscheduled outages disrupting output.
    Shipments from Iraq have also been hit by damage to
pipelines, and maintenance work is expected to cut Iraqi output
by between 400,000 and 500,000 bpd in September. 
    The European retail sales figures for June cast a shadow
over data from Britain and Germany showing modest growth in
manufacturing and construction, highlighting the fragile nature
of Europe's economic recovery and energy demand. 
    
    REUTERS INVENTORY FORECAST
    Analysts and investors polled by Reuters estimated that U.S.
crude oil and refined products inventories dropped in the week 
to Aug. 2. 
    U.S. crude oil inventories were expected to drop by 700,000
barrels to levels of 345.9 million barrels, a decrease of 3.7
million from levels seen this time last year. 
    Gasoline stockpiles were also expected to fall, dropping by
1.2 million barrels to reach 222.3 million barrels, 1.8 million
barrels lower than last' years level.
    Distillates - a category that includes diesel, heating oil,
and jet fuel - were the only products expected to see a rise in
inventory, with the polled analysts predicting an increase of
200,000 barrels to levels of 126.2 million barrels. 
    The American Petroleum Institute, an industry group, will
release its stockpile report on Tuesday at 4:30 p.m. EDT (2030
GMT). The U.S. Energy Information Administration will issue its
data on Wednesday at 10:30 a.m. EDT (1430 GMT).

 (Additional reporting by Robert Gibbons in New York,
Christopher Johnson in London, Manash Goswami in Singapore;
Editing by Andrew Hay, Leslie Gevirtz and John Wallace)

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