LONDON – Oil prices fell for the fifth day in a row on Thursday after word of a peace deal in the embattled Iraqi city of Najaf raised hopes of more reliable oil shipments from the energy-rich country and encouraged a run of profit-taking by big money speculators.
U.S. crude futures settled down 37 cents at $43.10 a barrel on the New York Mercantile Exchange (search), bringing them down more than $6 from a record high hit last week, when fears that world producers would not be able to keep pace with growing global demand hit a peak. Brent crude in London, meanwhile, dipped 35 cents to $40.33 a barrel.
Thursday's losses came after Iraq's most revered Shiite religious authority, Ayatollah Ali Al-Sistani, brokered a deal with rebel cleric Moqtada Al-Sadr (search) to end a three-week uprising by Sadr's militiamen in the holy city of Najaf, signaling a possible easing of tensions in the war-torn country.
Turmoil in Iraq, which is struggling to restore its once-robust crude exports, has underpinned oil price strength in recent months, adding to worries over a lack of spare production capacity from other OPEC (search) nations and flourishing demand growth in China and India.
Saboteurs in Iraq overnight Wednesday attacked a group of eight pipelines linking a main southern oilfield to a pumping station near the city of Basra, but shipping agents said the attacks had not affected southern Iraqi exports, recently restored to a full 2 million barrels a day.
"There's a mixture of trade and fund selling," said Prudential Bache broker Tony Machacek. "After such a substantial selloff yesterday, a lot of people think it has some way to go to the downside."
A U.S. government report Wednesday showing hefty gasoline inventories at the tail-end of the summer vacation season in the world's largest energy consumer also encouraged selling, after analysts earlier in the year had predicted tighter environmental regulations and high demand would cause a fuel crunch.
The U.S. summer driving season traditionally ends on Labor Day weekend in early September, spelling a decline in gasoline demand and a brief reprieve for the oil markets ahead of the winter heating season.
While analysts say the market has been due for a correction for some time, they also say fundamental support is not far below the market, with global demand growth running at the fastest rate in 24 years.
A leading oil shipping analyst added Thursday that crude oil shipments from OPEC were expected to have declined 380,000 barrels-per-day in August, countering expectations they would increase.
"The projections are probably not far from the truth in terms of production and exports and are mostly down to interruptions in Iraqi oil supplies," said Roy Mason of consultancy Oil Movements.
"If it's confirmed by other agencies like the IEA (International Energy Agency (search)) and other analysts then it runs counter to what we actually thought was going on in August, namely that exports were climbing," he said.
OPEC has signaled that it planned to increase production in September to combat high oil prices, saying production would reach 30.5 million bpd in September from 29.6 million bpd in July.
OPEC President Purnomo Yusgiantoro said Thursday the recent retreat in global oil prices was not moving fast enough, and the producers' cartel wanted to see a swifter fall.
"We hope the price will continue to fall. We hope it can fall to around $30 per barrel. That is good enough," Purnomo said, referring to the OPEC reference crude price, which dropped to $40.45 a barrel on Wednesday from Tuesday's $41.43.
The head of the International Energy Agency, Claude Mandil, said this week that while the economic impact of oil's surge this summer so far has been modest, growth would soon suffer if prices were to stay at current levels for long.
"It's true to say that (so far) there is not a significant result in economic damage," he said. "We see it in the long term, if oil prices are sustained."
OPEC will meet Sept. 15 in Vienna to discuss a possible further increase in production quotas.