The price of oil plunged two per cent Friday, the largest one-day drop since April, as Libyan oil appeared poised to return to the market in the face of muted global demand.
Benchmark West Texas Intermediate crude for August delivery fell $2.10 to close at US$100.83 a barrel on the New York Mercantile Exchange. WTI has fallen $4.54 a barrel, or 4.3 per cent, so far in July.
Brent crude, a benchmark for international oils used by many U.S. refiners, fell $2.01 to close at US$106.66 on the ICE Futures exchange in London.
Oil prices shot up in June to a 10-month high over concerns that violence in Iraq might disrupt supplies from OPECs second-largest exporter. Prices then drifted lower over the past two weeks as the advance by Iraqi insurgents stalled.
After a slight gain Thursday, the losses accelerated Friday to their biggest drop since falling 2.2 per cent on April 22.
Along with more certainty about Iraqi supplies, a large increase in Libyan crude is expected to soon hit the market. Libyan exports have been slowed for nearly a year because of labour strife and other unrest, but recent agreements between the government and local militias may allow exports to surge in the coming weeks. U.S. crude production also continues to rise, adding even more oil to global supplies.
The International Energy Agency this week cited only a small increase in oil production by Saudi Arabia, suggesting that markets were well supplied.
"Contrary to seasonal patterns, the kingdom barely hiked production in June, a sign that demand for its crude may not have significantly increased," the Paris-based IEA said in its monthly oil market report.
At the same time, the IEA slightly lowered its 2014 forecast of global oil demand due to weaker than expected economic data in the middle of the year. It predicted demand would rise 1.5 per cent next year, to 94.1 million barrels a day.
The U.S. Energy Department reported this week that gasoline supplies in the U.S., the world's biggest consumer, appear plentiful and U.S. demand fell slightly compared with last year.
In other energy futures trading on the Nymex, wholesale gasoline fell 4.9 cents to close at US$2.909 a U.S. gallon (3.79 litres), heating oil fell 3.2 cents to US$2.861 a gallon and natural gas rose 2.6 cents to close at US$4.146 per 1,000 cubic feet.
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