WTI Crude Falls for Second Day on Libyan Output Plans

West Texas Intermediate crude dropped for a second day on Libyan plans for production to increase next month, while Iranian President Hassan Rohani pledged in his inaugural speech to shun extremism and take a moderate approach.

Futures fell 0.4 percent as Libyan Oil Minister Abdulbari Al-Arusi said today in Tripoli that the country will probably pump 800,000 barrels a day next month, up from 700,000. Another official said the Marsa el Hrega crude-export terminal has reopened. WTI rose 2.1 percent last week as Libyan exports were cut. Rohani said the U.S. and the European Union should end sanctions that have curbed Iran’s oil exports.

“The Libyan oil minister’s statements about the rise in oil production promptly sent the market about $1 lower,” said John Kilduff, a partner at Again Capital LLC, a New York hedge fund that focuses on energy. “This helped alleviate concerns about Libyan production that underpinned last week’s rally.”

WTI crude for September delivery declined 38 cents to settle at $106.56 a barrel on the New York Mercantile Exchange. Prices dropped as much as $1.24 in intraday trading. The volume of all futures traded was 33 percent below the 100-day average at 3:30 p.m.

Brent oil for September settlement decreased 25 cents to end the session at $108.70 a barrel on the London-based ICE Futures Europe exchange. The European benchmark traded at a $2.14 premium to WTI, down from $2.01 on Aug. 2.

Libyan Production

Libyan crude output tumbled 330,000 barrels to 800,000 barrels a day in July, a Bloomberg survey showed. It was the fourth straight decline and sent production to the lowest level since December 2011. Two years after the 2011 war that swept the late Muammar Qaddafi from power, efforts to revive the oil industry are being stymied by feuding militias and protests.

The North African country reopened an oil port closed by protests last week. All but one of Libya’s oil-export harbors was shut last week because of a labor dispute. The Marsa el Hrega and Zawiya ports are operating while Es Sider, Ras Lanuf, Marsa Brega and Zueitina remain closed, Naji Mokhtar, head of the parliamentary energy committee, said Aug. 3 in a telephone interview from Tripoli.

“Some Libyan barrels are back on board and it looks like there is more to come,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “It looks like we’ll need a geopolitical event or positive economic indicator to make the market move higher.”

Libya, a member of the Organization of Petroleum Exporting Countries, has lost an estimated 4.5 million barrels of crude and 190,000 barrels of condensate shipments, Goldman Sachs analysts including Jeffrey Currie said in a research note dated Aug. 2.

‘Fundamental Steps’

Iran’s government will take “fundamental steps to elevate Iran’s position based on national interest and the lifting of the oppressive sanctions,” Rohani said in his speech. The U.S. said it will be “a willing partner” if Iran chooses to work toward a peaceful solution to the nuclear issue.

“Some rapprochement between Iran and the U.S.” could weigh on prices, said Christopher Bellew, a senior broker at Jefferies Bache Ltd. in London. “Brent dropped below $106 last week and could head there again soon.”

Commodities trimmed losses after the Institute for Supply Management’s U.S. non-manufacturing index increased to 56 July from 52.2 the prior month, a report from the Tempe, Arizona-based group showed today. The median forecast in a Bloomberg survey of economists called for a gain to 53.1.

Economic Reports

“The market rebounded after the better-than-expected ISM number,” Kilduff said. “Anything that points to a stronger U.S. economy is good for oil demand.”

Oil rose earlier after China’s non-manufacturing Purchasing Managers’ Index showed the first gain since March, according to government data on Aug. 3. The index climbed to 54.1 in July from 53.9. The increase follows an unexpected advance in a factory index last week and may boost confidence that Premier Li Keqiang’s policies are helping to prevent a deeper slowdown.

“This is the second positive number out of China in less than a week and seems to have put a bottom in the market,” Yawger said.

The U.S. and China are the world’s two biggest oil-consuming countries, accounting for about a third of global demand in 2012, according to BP Plc’s Statistical Review of World Energy.

Speculator Wagers

Hedge funds reduced net-long positions on WTI by 15,275 futures and options combined, or 4.6 percent, to 318,819 in the seven days ended July 30, according to the Commodity Futures Trading Commission’s weekly report on Aug. 2.

Money managers cut bullish bets on Brent for the first time in five weeks, data from ICE Futures Europe show. Speculative bets that prices will rise, in both futures and options, outnumbered short positions by 181,335 lots in the week ended July 30, the exchange said. That is a 5.3 percent reduction from the five-month high reached a week earlier.

Implied volatility for at-the-money WTI options expiring in September was 21.9 percent, up from 20.8 percent Aug. 2, data compiled by Bloomberg showed.

Electronic trading volume on the Nymex was 371,101 contracts as of 3:32 p.m. It totaled 523,952 contracts Aug. 2, 20 percent below the three-month average. Open interest was 1.86 million contracts.