LONDON, July 13: Oil prices fell on Tuesday, driven lower as a result of large-scale selling by speculative funds, which sought to bank profits ahead of the latest weekly estimates of US inventories, traders said.
In London the price of benchmark Brent North Sea crude oil for delivery in August fell by 31 cents per barrel to $36.32 in late afternoon trading. New York's light sweet crude for delivery in August lost 40 cents to $39.10 per barrel in early deals.
Fund selling was the major factor behind falling prices on Tuesday, rather than a report by the International Energy Agency that said Opec had increased output in June well above its official quota target, traders said.
"We are seeing a continuation of fund selling in the crude and gasoline market from yesterday," GNI-Man Financial trader Paul Goodhew said. Prudential Bache trader Tony Machacek added:
"It seems the fund lost confidence in the market's ability to rally and started to sell... it's maybe in anticipation of bearish stocks." The United States government was to publish on Wednesday its latest weekly estimates of US inventories, with analysts predicting rises in stocks of distillate, or heating oil, and gasoline.
Increases in US inventories would likely result in prices falling, as fears over supply would ease. The market meanwhile largely overlooked a report on Tuesday by the International Energy Agency that showed Opec oil producers increased their output by 635,000 barrels per day in June from the May figure to 28.6 million bpd, well above its official quota target.
The higher output came despite a fall of production by Iraq of 325,000 barrels per day, the IEA said. Excluding production by Iraq, the Organization of Petroleum Exporting Countries produced 26.9 million bpd in June or 960,000 more than in May, the IEA calculated.
But the overall increase was not enough to offset market concerns over strong demand and supply disruptions which have pushed oil prices above $40 per barrel, the IEA said.
Opec decided in Beirut at the beginning of June to increase its overall production ceiling from 23.5m barrels per day to 25.5m barrels per day on July 1 and by a further 500,000 barrels per day on August 1. -AFP
