Brent oil hit a three-month low on Friday, heading towards a third consecutive week of losses as fears of supply shortages in the Middle East and North Africa receded.
The North Sea benchmark slipped below $107 per barrel, on track for its steepest weekly decline since January, while U.S. crude fell to a two-month low below $101 as evaporating geopolitical risk prompted traders to short the market.
"We continue to see some liquidation selling in the market," said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut. "But there is still uncertainty surrounding Iraq, and that means the market should find some support."
Brent fell $2.07 to $106.60 a barrel by 1:40 p.m. EDT (1740 GMT). It earlier touched $106.27, the lowest intraday price since April 8.
U.S. crude fell $2.10 cents to $100.83, the lowest intraday since May 13.
The two benchmarks hit a nine-month high in June as a Sunni Islamist insurgency swept across northwestern Iraq, fueling concerns over supply disruptions from OPEC's second-largest producer.
Oil has weakened over the last month, as Iraq has not had supply disruptions and as news emerged Libya was set to ramp up its oil production. Libya's southern El Sharara field has pushed the country's oil output to 350,000 barrels per day, a spokesman for National Oil Corp said on Thursday.
"Libyan oil production is already on the rise, and this is reflected in the structure of the Brent market," said Tamas Varga, oil analyst at London brokerage PVM Oil Associates.
In Iraq, oil exports from the southern Basra ports continue, despite fighting in the north between Islamist militants and forces loyal to the Baghdad government.
Meanwhile, Kurdish peshmerga forces took over production facilities at two northern Iraqi oilfields, Bai Hassan and Kirkuk, replacing Arab workers with Kurdish personnel.
"If those supplies can flow, the market may be moving from relative tightness to relative oversupply," said John Kilduff, partner at Again Capital LLC in New York.
Markets well supplied, despite high risk
Output remains at risk in several key producing regions, the International Energy Agency (IEA) said in its monthly report on Friday.
"Supply risks in the Middle East and North Africa, not least in Iraq and Libya, remain extraordinarily high," the IEA said.
"Oil prices remain historically high and there is no sign of a turning of the tide just yet."
Global oil demand growth will accelerate next year as the world economy expands, according to the same report. Growing demand will again be met by rising supplies from the United States and Canada, further eroding OPEC's market share, the IEA said.SHOW MORE