Oil price falls below $104 a barrel after soaring on militant gains in Iraq

The price of oil dropped below $104 a barrel Thursday as the risk of supply disruptions in Iraq continued to recede and two key export terminals in Libya were expected to reopen soon.

By early afternoon in Europe, benchmark U.S. crude for August delivery was down 68 cents to $103.80 a barrel in electronic trading on the New York Mercantile Exchange, its sixth day of declines. On Wednesday, the contract fell 86 cents to $104.48.

Brent crude, a benchmark for international oils, was down 61 cents to $110.63 a barrel on the ICE Futures exchange in London.

Oil prices in recent weeks have largely been driven by concerns that violence in Iraq, OPEC’s second-largest producer, would disrupt supplies. Oil reached a 10-month closing high of $107.26 on June 20.

The al-Qaida-inspired Islamic State of Iraq and the Levant rampaged across Iraq in recent weeks, feeding off the chaos of neighbouring Syria’s civil war to seize control of a large chunk of territory in Iraq and effectively erasing the border between the two countries.

Despite the chaos, Iraqi oil production continued and prices began to stabilize when the militants advance appeared to have slowed after encountering stiff resistance in Shiite-majority regions of Iraq.

Additionally, an agreement in Libya between the central government and a regional militia was expected to lead to the reopening of two eastern oil terminals which would boost the country’s crude exports by about 500,000 barrels a day.

Olivier Jakob of Petromatrix in Switzerland said that since the start of the crisis in Iraq, “the crude oil market has seen no interruption of supply from the south of Iraq, an increase of supply from the north of Iraq (Kurdistan) and the re-opening of ports in Libya.”

The fall in oil prices came even as a report Wednesday from the U.S. Department of Energy showed stockpiles of crude fell a larger-than-expected 3.2 million barrels last week due to increased refinery activity.

In other energy futures trading on the Nymex:

— Wholesale gasoline was down 0.92 cent at $3.0148 a gallon.

— Natural gas added 1.9 cents to $4.376 per 1,000 cubic feet.

— Heating oil fell 1.42 cents to $2.9319 a gallon.