LONDON: Brent crude oil bounced off a 13-month low on Wednesday, paring early losses to trade near $103 a barrel as traders with one eye on potential supply disruptions in Iraq started buying.
U.S. crude prices fell, however, after the U.S. Energy Information Adminstration (EIA) reported a surprise rise in oil inventories of 1.4 million barrels last week, including a 418,000 barrel increase at Cushing, Oklahoma, delivery point of the U.S. contract.
Brent for September delivery was down 7 cents at $102.95 a barrel by 1442 GMT. The contract, which expires on Thursday, dropped as low as $102.37 in the session, the weakest since July 2013.
The Brent contract for October delivery was down 6 cents at $103.83 per barrel.
U.S. crude was down 40 cents at $96.97 a barrel, slipping for a second session. Its discount to Brent narrowed to the smallest in almost three weeks earlier in the session.
Brent, the international oil benchmark, has fallen 11 percent since mid-June as a surge by Islamic State militants in northern Iraq has not yet created major supply outages, while global crude output has been rising.
But traders said some in the market remained cautious, and were looking to buy contracts as prices fell towards the $100 level.
"Brent was due for a correction," said Carsten Fritsch, analyst at Commerzbank.
The U.S. dollar also weakened against the euro, providing additional support for commodities priced in the U.S. currency for holders of other currencies.
"Brent prices have been in a steady decline and I think the background of that is that the market is forming the view that any supply disruptions are not on the immediate horizon," said chief market analyst Ric Spooner of CMC Markets.
Exports from Libya are recovering despite the worst unrest in the country since 2011, with the first tanker leaving the port of Ras Lanuf on Tuesday since the end of a year-long harbour blockade.
CHINA
Demand in China, the world's second-largest oil consumer, also slipped last month, preliminary government data showed on Wednesday, with implied oil consumption down 2 percent from a year earlier, Reuters calculations based on preliminary government data showed.
Output from the Organization of the Petroleum Exporting Countries (OPEC) rose to a five-month high above 30 million barrels per day (bpd) in July, the International Energy Agency said on Tuesday.
The EIA said on Tuesday that U.S. crude production averaged an estimated 8.5 million bpd in July, the highest level since April 1987.
IRAQ AND LIBYA SUPPLIES
Brent prices have retreated in view of OPEC's ability to ramp up production and the absence of negative news on supplies despite the political conflicts, said Ben Le Brun, markets analyst at OptionsXpress in Sydney.
The unrest in Iraq has yet to disrupt significant amounts of oil from the second-largest producer in OPEC, though some small fields have been shut in the autonomous Kurdish region.
The United States has sent around 130 additional military personnel to the country as Washington seeks to help Baghdad contain the threat posed by militants from the Islamic State.
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