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Oil skids to near 3 week lows on Libyan supply expectations

Pump jacks and wells are seen in an oil field on the Monterey Shale formation where gas and oil extraction using hydraulic fracturing, or fracking, is on the verge of a boom on March 23, 2014 near McKittrick, Calif.
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Pump jacks and wells are seen in an oil field on the Monterey Shale formation where gas and oil extraction using hydraulic fracturing, or fracking, is on the verge of a boom on March 23, 2014 near McKittrick, Calif.

Crude oil fell by about $1 on Wednesday on encouraging signs for supply from Libya and Iraq, with prices headed toward the lowest close in almost three weeks despite support from a big draw in U.S. oil inventories.

Libyan export capacity looked likely to recover by about 500,000 barrels per day as rebels blockading eastern oil ports have agreed to reopen the remaining two terminals at Es Sider and Ras Lanuf.

Brent futures were down $1 a barrel around $111 a barrel, while U.S. oil fell more than a dollar intraday, but bounced off its session low to trade down 86 cents at $104.48.

Oil prices pared losses after the U.S. Energy Information Administration reported that domestic crude stocks fell by 3.2 million barrels last week, bigger than analysts' forecast of a 2.2-million-barrel drop. Still, Both benchmarks were headed for their lowest session close since mid-June.

There have been repeated reports that ports would reopen and production increase, but analysts said the latest developments were likely to have more impact.

Brent, the North Sea benchmark, hit a nine-month intraday high of $115.71 two weeks ago on worries that a Sunni Islamist insurgency in northern Iraq would hit oil output and exports.

Prices have fallen steadily since then as oil facilities, mostly in southern Iraq, hundreds of kilometres from the fighting, have remained in operation. Iraq is OPEC's second-biggest producer and exporter and pumped 3 million bpd last month, a Reuters survey showed.

--By Reuters. For more information on commodities, please click here.

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