SINGAPORE (Reuters) - Brent crude hit a more than three-week low below $111 a barrel on Monday amid expectations of a rise in supplies as Libya gears up to resume oil exports from two ports that have been closed for nearly a year.
The benchmark dropped 2.3 percent last week, its biggest weekly decline since early January, as the Libyan news offset worries about exports from strife-torn Iraq.
Brent rose 3 cents to $110.67 a barrel by 0642 GMT, near a more than three-week low of $110.51 hit earlier. U.S. oil fell 22 cents from Thursday to $103.84 a barrel. There was a public holiday in the United States on Friday.
“It’s going to put some pressure on Brent, but still we need to see how much exports will return,” said Ken Hasegawa, a commodities sales manager at brokerage Newedge Japan, referring to supply from Libya.
State-run National Oil Corp lifted force majeure from the major eastern Ras Lanuf and Es Sider oil ports after rebels agreed last week to end a blockade to press financial and political demands.
The two Libyan oil ports had been exporting about 500,000 barrels per day (bpd) of crude, a chunk of the 1.4 million bpd that the OPEC producer pumped in the second quarter last year before protests started.
“If the agreement holds, it will take some time, probably a week or two, to inspect both the oilfields and the export facilities for damage and to complete any required maintenance or repairs,” Societe Generale’s Michael Wittner said in a note.
“Libya is a near-term wildcard, but any Libyan volumes that return to the market simply mean that Saudi Arabia won’t have to increase output as much this summer.”
But geopolitical tensions in Iraq and Ukraine should continue to underpin oil prices. Brent hit this year’s high above $115 in June when fighting broke out in northern Iraq.
“There is still uncertainty in Iraq and Ukraine, supporting oil prices at these levels,” Hasegawa said, adding that Brent could easily test the year’s high if there was any sign of supply disruption.
Iraq’s parliament is in a deadlock to form a new government. Shi’ite Muslim cleric Moqtada al-Sadr has urged Prime Minister Nuri al-Maliki’s coalition to withdraw its support for his bid for a third term and pick another candidate.
In Ukraine, the government re-took their stronghold of Slaviansk in what President Petro Poroshenko called a turning point in the fight for control of the country’s east.
Investors are also eyeing Chinese trade data due later this week for further evidence that a recovery is taking hold in the world’s No. 2 economy as a flurry of government stimulus measures kick in.
Global oil products demand growth is expected to improve to 1.6 million bpd in the second half of the year, from an average of 1 million bpd in the first half, as Chinese growth picks up while the United States slows down, Wittner said.
IMF chief Christine Lagarde said on Sunday that global economic activity should strengthen in the second half of the year and accelerate in 2015, although momentum could be weaker than expected, hinting at a slight cut in the Fund’s growth forecasts.
Editing by Himani Sarkar