Global oil prices dropped by more than $1 per barrel on Monday despite upbeat economic data from China and Europe, as higher crude output from Iraq and a possible thaw in US-Iran relations boosted the supply outlook.
Oil prices plummeted last week as Libya’s production recovered to nearly 40 percent of pre-war capacity after protesters agreed to reopen major western fields, and as fears of U.S.-led military action against Syria faded.
Brent has shed around $8 from its September high above $116 at the beginning of the month.
Libya’s eastern Hariga port could reopen this week but negotiations were continuing in hopes of ending a dispute that has shut larger eastern terminals for weeks, the head of the energy committee in parliament said on Monday.
“There’s been a lot of progress in Libya and that’s outweighing some of the positive data from China and Europe,” said Joseph Basilico, senior vice president of energy derivatives at Jefferies Bache in New York.
Brent crude for November delivery fell $1.27 to $107.95 per barrel at 1:07 p.m. EDT (1707 GMT). Its session low was $107.76. US crude for November fell $1.31 to $103.44 a barrel.
Iraq, a key OPEC producer, said on Monday it boosted output from its southern oilfields after repairing a leaking pipeline.
More oil is also coming from South Sudan as it raised output to the highest level since it resumed exports through Sudan.
“The return to the market of Libyan and South Sudanese supply is weighing on prices. South Sudan is currently producing 240,000 barrels of crude oil per day, the highest volume since oil production was shut down in January 2012,” Commerzbank senior oil analyst Carsten Fritsch said.
The bearish mood for oil also drew support from the possibility of a groundbreaking meeting between leaders of the United States and Iran on the sidelines of the United Nations gathering this week.
Iranian President Hassan Rouhani is aiming to set the tone for further nuclear talks with world powers which he hopes will bring relief from sanctions, according to diplomats and analysts.
Iranian Foreign Minister Mohammad Javad Zarif agreed to new talks on its nuclear program with six world powers including the United States during this week’s gathering of world leaders in New York. US Secretary of State John Kerry welcomed the development.
Exports from Iran, one of the largest crude producers, have more than halved in recent years to around 1 million barrels per day in 2012 due to tightening sanctions.
China’s flash HSBC Purchasing Managers’ Index (PMI) hit a six-month high, putting to rest investors’ worries of a sharp slowdown in the world’s second largest economy.
In the euro zone, China’s largest business partner, the Markit Flash Composite PMI showed business activity has grown faster than expected this month as new orders flood in at their fastest pace in over two years.
US manufacturing activity growth slowed in September as demand for products declined and firms took on fewer workers, an industry report showed on Monday, said financial data firm Markit.