Brent crude oil slipped towards $104 a barrel on Monday, close to a four-month low, as worries about oversupply outweighed concerns over violence in North Africa and the Middle East.
A supply glut in West African and European markets dragged Brent down 3.3 percent last week with the front Brent futures contract touching $104.39, its lowest since early April.
North Sea crude for immediate delivery has now been at a discount to futures in a formation called a contango for the longest period since 2011, indicating a well-supplied market.
The fall came despite conflicts in key oil producers Iraq, Libya that could disrupt oil production in future.
Brent crude was fell 20 cents to $104.64 a barrel by 1230 GMT, after falling $1.18 on Friday to $104.84 a barrel, its lowest settlement since April 2.
U.S. crude slipped 36 cents to $97.52 after ending last week at its lowest settlement since Feb. 6. The U.S. contract futures fell more than 4 percent last week in the biggest weekly decline since January.
“Physical markets may be just starting to stabilize, but are still relatively weak,” said Olivier Jakob at Petromatrix consultancy in Switzerland. “Brent is still in a contango.”
Jakob said escalating violence in Iraq and Libya would continue to offer some support oil prices in the coming week.
“Libya is really going down the wrong way. Production has been slowly coming off,” he said. “Libya could quickly return to a much lower production level.”
Libya’s government said more than 20 people had been killed on Sunday, while fighting led to a huge fire raging nearby at the city’s fuel depot, as battles raged for control of the capital’s airport in the worst violence since the 2011-NATO-backed civil war.
Commerzbank oil analyst Carsten Fritsch said oil prices could rise significantly if the situation deteriorated further.
“Market participants are doing an excellent job of ignoring the geopolitical risks,” he said in a note to clients. “The oil market has settled into a dangerous state of complacency.”
In Iraq, July oil exports increased to an average of 2.44 million barrels per day (bpd), up from 2.42 million bpd in the previous month, despite shipments from major oilfields around Kirkuk being suspended due to fierce fighting in the north of country.
Kurdish peshmerga forces said they planned a counter-offensive against Islamic State fighters who seized Ain Zalah oilfield and the country’s largest dam on Sunday.
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