Oil sank on Monday, with Brent near a 14-month low and U.S. oil sinking to its weakest since January, as weak demand and easing concerns over risks to supply offset fears about geopolitical risk.
On Monday, oil shed nearly $2 as investor worries over conflict in Iraq eased, and as higher Libyan oil output added to already ample supplies.
Brent crude for October delivery was flat under $102 a barrel, still within view of a 14-month low after closing $1.93 a barrel lower on Monday. U.S. crude for September delivery added to earlier losses, dropping by $1.93 to settle at $94.48 a barrel, its lowest since January 17. The contract, which expires on Wednesday, ended the previous session down 94 cents.
Iraqi and Kurdish forces recaptured Iraq's biggest dam from Islamist militants with the help of U.S. air strikes to secure a vital strategic objective in fighting that threatens to break up the key oil producing country.
In Ukraine, government forces advanced on pro-Russian rebels, but continued fighting in the country suggests the risks are far from over. Dozens of people, including women and children, were killed on Monday as they fled fighting in eastern Ukraine when their convoy of buses was hit by rocket fire.
None of that, however, was helpful for crude, which was undermined by fundamentals. U.S. commercial crude oil and refined product stockpiles were forecast to have fallen in the week to Aug. 15, a preliminary Reuters survey of analysts showed.
The analysts estimated, on average, that crude oil stocks decreased 1.5 million barrels last week. Distillate stockpiles were seen down 200,000 barrels, and gasoline inventories down 1.7 million barrels.
The survey was taken ahead of weekly inventory reports from industry group the American Petroleum Institute (API) due at 2030 GMT and from the U.S. Department of Energy's Energy Information Administration (EIA) due on Wednesday.
Despite falling inventories in the United States, large crude builds globally in the second quarter is now reflected in the weak market structure known as contango, where prices for prompt delivery is cheaper than for future months, analysts at Energy Aspects said in a note.