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Oil prices dip on Iraq crisis

08 July 2014, 06:43

London - Oil prices eased on Monday as dealers balanced declining concerns over the jihadist insurgency in Iraq with upbeat sentiment about US demand following strong jobs data, analysts said.

Brent North Sea crude for delivery in August dipped one cent to stand at $110.63 a barrel around midday in London deals.

US benchmark West Texas Intermediate for August fell 22c to $103.84 compared with Friday's close.

Desmond Chua, market analyst at CMC Markets in Singapore, said oil prices "continue to track lower as Iraq's production remains unaffected by the recent unrest".

The rebel group has overrun swathes of Iraq and is close to Baghdad following a lightning offensive since June 9, displacing hundreds of thousands of people and initially alarming global oil markets.

After nearly four weeks of fighting with government forces, however, the group has yet to directly threaten the key oil-producing region in the country's south.

Iraq is the second biggest producer in the 12-nation Organization of the Petroleum Exporting Countries (Opec) oil cartel, pumping 3.4 million barrels a day and possessing more than 11% of the world's proven reserves.

Prices were being pulled down also by the prospect of Libyan oil production returning to normal, traders said.

Libyan production has been severely limited for a year after rebels last summer 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 output.

But the re-opening of two terminals should hike output by about 500 000 barrels a day according to analysts.

Last week's US jobs data meanwhile showed that the world's biggest economy added 288 000 jobs in June, well above expectations of 215 000. The unemployment rate also fell to 6.1% from 6.3% in May.

The Dow Jones Industrial Average closed above 17 000 for the first time on Thursday after the solid jobs data release.

US markets were closed on Friday for the Independence Day holiday and reopen later on Monday.

Chua said investors would next be looking to minutes from the Federal Reserve's June meeting to be released on Wednesday for clues about the strength of the US economy.



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