Oil prices tumbled on Tuesday, with Brent crude leading the decline as ample supply in Europe and North America outweighed fears that turmoil in the Middle East and North Africa could disrupt production.
Worries about the prolonged geopolitical tension in key-producing regions had prompted a short rebound in the oil market after the weekend. But in the absence of supply disruptions, the market resumed its downward trend in Tuesday's mid-morning session, as traders and investors grew more nervous about seasonal weak demand and poor refinery margins in a market that appears to be abundantly supplied.
"We continue to see material risk to supply from Libya, Iraq, and Russia, but the market over the past six weeks has become increasingly complacent regarding supplies,'' said Tim Evans, an energy futures specialist at Citi in New York.
Global oil demand has been running below supply over the last few months, building up a glut of high quality crude oil in the West African, European and Asian markets.
Libyan oil output dropped to around 450,000 barrels per day (bpd) from 500,000 bpd last week, but a spokesman for the state-run National Oil Corp said oilfields were still secure despite clashes between rival militias in the capital, Tripoli.
Oil production has dropped from 1.4 million bpd a year ago because of strikes by oil guards and fighting that has damaged Tripoli's main airport and sent foreign diplomats and workers fleeing abroad.
Oil exports from Iraq, OPEC's second-largest producer, increased to an average of 2.442 million bpd in July from 2.423 million in June, the oil ministry said on Monday, even though Islamic State insurgents tightened their grip in the north. A preliminary Reuters survey of analysts on Monday suggested U.S. commercial crude oil inventories fell by about 1 million barrels in the week to Aug. 1, while gasoline stocks were unchanged.
--By Reuters. For more information on commodities, please click here.