The price of oil fell below $100 a barrel Tuesday for the first time since May even as the deteriorating security situation in Libya has raised questions about whether the country can soon increase crude exports.
Benchmark U.S. crude for August delivery fell 95 cents to close at $99.96 a barrel on the New York Mercantile Exchange. Oil is down 5 percent since the beginning of the month.
Brent crude, a benchmark for international oils used by many U.S. refineries, fell 92 cents to close at $106.02 on the ICE Futures exchange in London.
Paul Belflower, vice president of marketing and supply at Oklahoma City’s Mustang Fuel Corp., said prices dropped because traders are not as concerned as they had been about potential supply disruptions around the world.
“I think the market has given up some of the fear premium built in since mid-June over unrest in Iraq and Ukraine,” Belflower said. “If our domestic production wasn’t so strong now, I think this premium would have been even higher.”
He noted the August price for West Texas Intermediate crude, which is priced at Cushing, rose back above $100 after hours on Tuesday.
Prices have been falling in recent weeks as worries about supply disruptions from Iraq eased and on the prospect of more supplies from Libya. Weaker than expected economic data for the first half of the year prompted the International Energy Agency and other experts to trim their forecasts for short and medium term demand.
Oklahoma Oil and Gas Association President Chad Warmington said declining prices are a testament to the strength of the ongoing U.S. oil renaissance.
“It has been the norm that the market priced in expectations of supply issues and now the market has to factor in domestic surplus, not supply issues,” he said. “This makes markets less sensitive to the instability caused by events in foreign countries.”
On Tuesday, Fed Chair Janet Yellen’s remarks to Congress on the U.S. economy strengthened the value of the U.S. dollar, also helping to push oil lower. Because oil is priced in dollars, a stronger dollar makes oil look comparatively more expensive — and therefore less desirable — to holders of other currencies.