* Libyan rebels say will reopen two oil terminals
* Brent on track for biggest weekly fall since January
* EIA data shows bigger-than-forecast cut in crude stocks
(Updates prices to settlement)
By Anna Louie Sussman
NEW YORK, July 2 Crude oil fell about $1 on
Wednesday on encouraging signs for supply from Libya and Iraq,
notching the lowest close in almost three weeks despite 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.
"Overall the fundamentals are looking a little more bearish,
partly because the market believes that Libya will actually
export oil," said Phil Flynn, an analyst at the Price Futures
Group in Chicago, Illinois.
Brent crude shed $1.05 a barrel to settle at
$111.24. U.S. light crude fell more than a dollar to a
session low of $104.25, then bounced to settle down 86 cents at
Oil prices pared losses after the U.S. Energy Information
Administration reported that domestic crude stocks fell by 3.2
million barrels last week, more than the 2.2 million-barrel draw
forecast by analysts.
The settlement price for both benchmarks was the lowest
"The bullish inventory data was able to rally the market,
then we hit resistance and the market failed," said Bill Baruch,
senior market strategist at iitrader.com in Chicago, Illinois.
There have been repeated reports that Libyan ports would
reopen and production increase, but analysts said the latest
developments were likely to have more impact.
U.S. gasoline stocks fell by 1.2 million barrels, countering
expectations of a 0.4-million-barrel rise, as drivers filled
their gas tanks ahead of the national holiday weekend.
However, a hurricane set to hit the U.S. East Coast over the
weekend could cause people to cancel vacation plans.
IRAQ SITUATION "HOLDING"
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 kilometers 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.
"The situation is kind of 'holding,' for lack of a better
word," said John Kilduff, a partner at Again Capital LLC in New
"We're probably less worried about an attack on the southern
oil infrastructure than we have been in several weeks. Between
the Kurds and the Shia central government securing the oil
fields, the oil will continue to flow."
Oil producers would struggle to cover another big oil supply
outage, industry officials say, increasing the chance
governments may tap strategic reserves if Iraq's southern
exports were disrupted.
(Additional reporting by Christopher Johnson in London, Manash
Goswami in Singapore; Editing by William Hardy, Dale Hudson and