Oil prices dropped 2.7 percent on Monday after Iraq announced it would resume crude exports from May 8, ending a month-long ban on sales to protest against Israeli incursions into Palestinian territory.
Baghdad’s decision, reversing its self-imposed embargo on April 8, will add up to two million barrels per day (bpd) of crude to the world market of about 76 million bpd.
U.S. light crude fell below $26 a barrel for the first time in almost two weeks to stand at $25.91, 71 cents down from Friday’s settlement in New York.
Brokers said the market was seeing some resistance to a sustained move below $26 with Japan and London’s International Petroleum Exchange (IPE) closed for public holidays.
North Sea Brent Blend crude futures are listed on the IPE.
“I expect the market to move lower, but people are wary with Japan and the UK closed. I don’t think it’s going to be an easy ride down, the bulls will be looking at the erosion of the U.S. inventory overhang,” said Simon Games-Thomas at NM Rothschild & Sons in Sydney.
Iraq said on Sunday it would resume oil exports on May 8 following a suspension of sales on April 8 in protest at Israel’s military action in Palestinian territories.
It blamed fellow Arab oil-producers for failing to heed its call for a wider embargo.
“The decision did not find a positive response from Arab brethren who posses the oil and who should have taken similar steps in line with the Iraqi initiative to make it successful,” Iraqi television said in a statement after a cabinet meeting chaired by President Saddam Hussein.
Iran and Libya were the only countries to voice support for the Iraqi oil ban but said their participation would be conditional on a blanket ban by all Muslim producers.
Saudi Arabia, the world’s biggest exporter, ruled out the use of oil as a weapon in the Middle East conflict.
“It was decided to resume oil pumping after the expiry of the one-month period, which means after midnight of May 7,” the Iraqi statement said.
Iraq exports crude under the United Nations oil-for-food deal, permitted as an exception to U.N. sanctions imposed on Baghdad after its 1990 invasion of neighbouring Kuwait.
An Iraqi official told Reuters on Sunday that state oil marketer SOMO was sending customers notice of the export restart and was asking them to sign up for crude loadings this month.
“We hope our customers send their vessels as quickly as possible,” the senior official said.
He said SOMO was asking clients who had booked tankers to load before May 8 to reschedule, or renominate, those liftings. Baghdad also was seeking nominations for oil loadings before the remainder of the month.
QATAR SEES PLENTY OF OIL
The U.N. Security Council is expected to vote this week on a resolution revising the terms of the Iraqi sanctions and to approve a new six-month phase of the oil-for-food programme. The current tranche of the programme runs out at the end of May.
Iraq is a leading crude supplier into the United States, the world’s biggest oil consumer, but its export ban has yet to show up in figures for U.S. fuel stockpiles, which are running at surpluses versus a year ago.
Qatari Oil Minister Abdullah al-Attiyah said on Sunday there was no need for the OPEC producers’ cartel to lift supply curbs soon as the market was brimming with oil despite the Iraqi ban.
“I am convinced there is more supply than the market needs,” Attiyah told Reuters. “There is no question of OPEC increasing production in June.”
The Organisation of the Petroleum Exporting Countries is due to meet to review production policy on June 26. The cartel has slashed output limits by five million bpd since January 2001 to counter wilting oil demand due to the global economic downturn.
OPEC’s current output of 21.7 million bpd, excluding sanctions-bound Iraq, is the lowest in a decade.