Brent crude oil fell to a 13-month low on Tuesday as increased OPEC production helped dampen concerns over potential supply disruptions in Iraq and Libya.
A plunge in German analyst and investor market sentiment to the lowest level in more than 1-1/2 years because of the crisis in Ukraine pressured German shares and fueled worries about demand for petroleum.
September Brent crude fell $1.66 to settle at $103.02 per barrel. Brent's $102.65 intraday low was the lowest price since July 1, 2013.
The September contract expires on Thursday.
U.S. September crude fell 71 cents to settle at $97.37 a barrel, having fallen earlier to $96.81.
The International Energy Agency said that while the situation in several producer countries was "more at risk than ever," supplies were ample and the Atlantic Basin was facing a glut.
OPEC output hit a five-month high of 30.44 million barrels a day in July with a 300,000-barrel-per-day rise led by Saudi Arabia and Libya, the agency said.
"In terms of the physical side of things, particularly for Brent, there are pretty high inventories at the Atlantic Basin at the moment and that's holding back gains," said Ankit Pahuja, a commodity strategist at investment bank ANZ.
Libya's output remains around 450,000 barrels a day despite clashes between armed factions in Tripoli and Benghazi, a National Oil Company spokesman said on Monday.
The IEA said Libya's output reached 430,000 barrels a day in July.
Production in Iraqi Kurdistan remains largely unaffected and July exports from southern Iraq held at near record levels of around 2.5 million barrels a day.
Oil prices also felt pressure on Tuesday from news that Saudi King Abdullah has congratulated Haider al-Abadi on his appointment as Iraq's new prime minister, after Abadi's nomination had been supported by Iran.
The departure of Abadi's predecessor Nuri al-Maliki and a successful formation of a unity government able to confront insurgents in Iraq would reduce supply disruption fears, brokers and traders said.
U.S. and European Union sanctions on Russia over the crisis in Ukraine have not yet disrupted supply, but the IEA cautioned that the sanctions are expected to trim Russian demand.
"I think the German investor confidence and IEA reports both highlight the recent market theme about demand being challenged," said John Kilduff, partner at Again Capital LLC in New York.
Meanwhile, U.S. crude oil production is rising. Output averaged 8.5 million barrels a day in July, the most since April 1987, the Energy Information Administration said on Tuesday.
Ahead of weekly reports on U.S. oil inventories, U.S. crude oil stocks were forecast to have fallen 2.0 million barrels in the week to Aug. 8, according to a Reuters survey of analysts.
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