Oil shed more than $1 a barrel to reach its lowest in over a year on Monday, as investor concerns over conflict in Ukraine and Iraq eased, and as higher Libyan oil output added to already ample supplies.
Crude jumped on Friday after the government in Kiev said its artillery had partially destroyed a Russian armored column. While fighting between Ukrainian forces and pro-Moscow separatists continues, fears of a further escalation proved unfounded.
The September U.S. crude contract is set to expire on Wednesday. Its premium, or backwardation, to the October contract widened intra-day to a high of $2.48, indicating supplies in the later month were expected to be more ample than in the immediate-term.
In Iraq, Kurdish peshmerga fighters and Iraqi forces have pushed Islamic State militants out of Mosul dam, state television reported on Monday, while higher Libyan output threatens to compound ample supply.
Advances by militants in Iraq in June prompted a rise in oil prices, although the fighting has yet to affect oil supplies from southern oil ports, the outlet by which almost all of Iraq's crude exports reach world markets. Libya's production, disrupted for months by strikes and protests, had risen to 535,000 barrels a day (bpd) on Sunday, a spokesman for the state oil company said, higher than previously reported. Still, production remains far below the 1.4 million bpd Libya pumped last year.
Adding to easing tensions and rising output in Libya, Brent has been weighed down by low demand from refineries in Europe and Asia, pushing prices into a deepening contango structure where immediate supply is cheaper than oil for later delivery.