Oil prices fell to their lowest in two months on Tuesday as the handover of power in Iraq raised hopes for less sabotage and steadier exports.
U.S. light crude settled 1.6 percent, or 58 cents, lower at $35.66 a barrel.
Growing U.S. commercial supplies and higher OPEC output have eased fears about summer gasoline shortages and knocked about $6 a barrel off the price of oil since record New York futures highs at the start of June.
News over the weekend that southern Iraqi oil exports resumed after pipeline sabotage weighed on values, as did the end of a strike at Norway’s state-owned oil company.
London’s Brent crude settled 59 cents lower at $33.11 a barrel.
Monday’s earlier-than-expected handover of Iraqi sovereignty had prompted selling, which continued on Tuesday.
Gasoline futures fell more than two cents to $1.124 a gallon after dropping about more than six cents a gallon on Monday.
A 23 percent fall in U.S. gasoline prices since mid-May has helped pull crude down from the $40 level as fears for summer supply shortages diminish.
“The fact that fundamentals are softening and prices heading down comes as no surprise,” said analysts at PFC Energy.
Chinese efforts to slow economic growth, reduced fears over the security of Middle Eastern supplies, and higher OPEC output were driving the price downturn, PFC said.
The Organization of the Petroleum Exporting Countries agreed earlier in June, when New York futures prices were at record highs, to raise its formal output limits by two million bpd from July 1. It also agreed to lift curbs by another 500,000 bpd from August 1.
Prices could quickly go back up again in the event of a major attack on oil facilities, analysts said.
“If the situation in Iraq does worsen substantially, exports could be curtailed far more than has occurred to date and prices could spike over $40 again,” the PFC Energy report said.
The latest weekly inventory snapshot from the U.S. government was expected to show tighter gasoline supplies, but a build on crude.
A Reuters poll of seven analysts, ahead of the release of the Energy Information Administration data on Wednesday, forecast an average drop of 800,000 barrels in gasoline stocks in the week to June 25.
Commercial crude stocks were expected to show a two-million-barrel build, which would extend an uptrend to 18 of the past 22 weeks.