SINGAPORE: Brent crude prices fell below $106 a barrel on Monday, snapping a two-day winning streak, as worries about supply disruption eased after Libyan rebels occupying four eastern oil ports agreed to gradually end their eight-month old blockade.
A major advance for the north African exporter, the end to the oil port standoff is taking some supply worries off the market that helped push prices to a high of $112 for the year.
Investors are now waiting for details on the volume Libya will start shipping, while also assessing US gasoline demand to gauge the outlook for oil.
Brent crude dropped 77 cents to $105.95 a barrel by 0425 GMT, after ending the week 1.3 percent lower. US oil declined 26 cents to $100.88, after posting its first weekly loss in three.
"Oil, particularly Brent, will come under pressure only if Libyan exports rise above 1 million barrels per day (bpd)," said Tetsu Emori, a commodity fund manager at Astmax Investment.
"If they are less than that, the downside will be limited." Libya's Zueitina and Hariga ports, held by federalist rebels demanding more autonomy from Tripoli, will open immediately while the larger ports, Ras Lanuf and Es Sider, will be freed in two to four weeks after more talks.
Further losses in oil prices were, however, checked by data showing strong jobs growth in the United States.
The jobs number added to a range of indicators from manufacturing and services sector activity to automobile sales that have signalled strength as the first quarter ended.
The promising economic indicators are boosting expectations of strong gasoline sales as the world's top oil consumer, the United States, enters the peak summer driving season.
PRICE OUTLOOK
"We might see oil holding around these levels because peak winter demand has ended and the market is waiting to see what the summer gasoline demand will be like," Emori said.
"The market wants to see if gasoline will offset the fall in heating oil demand."
US gasoline demand over the past four weeks was 3.8 percent higher than a year ago at 8.79 million bpd, the latest Energy Information Administration (EIA) data. Gasoline stocks fell 1.6 million barrels, compared with forecast for a 1.1-million-barrel drop, data showed.
Investors are also watching the progress in talks between world powers and Iran on the Islamic Republic's nuclear programme.
The United States dismissed suggestions that Iran was exporting much more oil than it is allowed to sell under a preliminary nuclear deal and predicted that aggregate Iranian oil sales would meet targets set for Tehran.
The remarks from a senior US official came ahead of a new round of senior-level negotiations between Iran and the United States, Britain, France, Germany, China and Russia in Vienna on April 8-9.
Brent is expected to fall into a range of $104.08-$104.90 per barrel, while US oil is expected to retrace more into a range of $100.15-$100.55, according to Reuters technical analyst Wang Tao.
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