Oil Prices Extend Drop Over Supply Disruptions

Oil prices fell further Friday on easing concerns over supply disruptions, offsetting firm demand for crude in the United States and China, traders said.

Brent North Sea crude for delivery in August dipped 13 cents to stand at $110.87 a barrel approaching midday in London.

US benchmark West Texas Intermediate for August slipped 16 cents to $103.90 compared with Friday's close.

Singapore's United Overseas Bank said in a client note that "supply fears begin to ease after Libya declared an end to an oil crisis that has slashed exports".

Crude prices began sliding on Wednesday after Libya's interim Prime Minister Abdullah Al-Thani declared that authorities had wrested control of export terminals from rebels.

Production in Libya, a member of the The Organization of the Petroleum Exporting Countries (OPEC) oil cartel, has been severely limited for a year since rebels blockaded terminals as part of a campaign to restore autonomy in the country's eastern region.

Its output currently stands at some 320,000 barrels per day, about a fifth of its normal production.

"Libya has seen promising progress this week in regards to recovering much of its halted oil export capacity," said Dorian Lucas, an analyst at energy consultancy Inenco.

But supporting prices was news that "Asia's industrial powerhouses, China and Japan, both saw manufacturing activity expanded further in June", he added.

Meanwhile in the United States, the Labor Department on Thursday said the US economy added 288,000 jobs in June, well above expectations of 215,000, while the unemployment rate fell to 6.1 per cent from 6.3 per cent in May.

Back on the supply side, concerns over a possible supply disruption due to Iraq's security crisis have also eased.

Islamist militants have overrun swathes of territory in Iraq since June 9, but have so far not yet directly threatened the key oil-producing region in the country's south.

Oil price losses have been capped, however, by a bigger-than-expected drop in US crude inventories.

The US Energy Information Administration on Wednesday said American commercial crude inventories fell 3.2 million barrels last week, almost twice the amount predicted by analysts.