New York: Oil prices dropped in spite of worsening violence in Libya and ongoing trouble in other petroleum hotspots as traders focused on the lofty state of oil supplies. US benchmark West Texas Intermediate for September delivery declined 42 cents to $101.67 a barrel on the New York Mercantile Exchange. European benchmark Brent oil for September delivery fell 82 cents to $107.57 a barrel in London.
"We have ample supplies of oil," said Gene McGillian, broker and analyst at Tradition Energy, who cited high output from the North Sea and West Africa, among other places. With half the US summer driving season over, "fundamentals really haven't tightened as much as people thought, and that's starting to weigh the market down," he added.
Monday's decline in oil prices came despite a growing fire at an oil depot on the outskirts of Tripoli that the Libyan government warned could become a 'disaster with unforeseeable consequences'.The blaze erupted when a rocket struck a tank containing more than six million liters (1.6 million gallons) of fuel. Firefighters have fled the scene because of clashes between rival militias.
The uptick in violence in Libya calls an expected recovery in oil production into question from the North African country, said Timothy Evans, analyst at Citi Futures. Traders are also eyeing ongoing violence in Israel and Ukraine, with the European Union readying new sanctions on Russia over its involvement in Ukraine.
"Even though it seems the geopolitical hot spots are still kind of simmering, I think the market is reflecting that we really haven't had a supply disruption yet," McGillian said. Still, McGillian said the fighting in key oil-producing areas "will start to provide more and more support to the market."
