Brent crude fell below $115 a barrel today, weighed down by expectations that Opec's oil output in May would come in higher than April, while investors also kept an eye on demand from top consumer the United States as the summer driving season begins.
More oil from top exporter Saudi Arabia and fellow Opec members Nigeria and Iraq should push the group's total output higher and more than compensate for a further fall in Libyan supply in May, according to a Reuters survey.
Brent fell 64 cents to $114.39 a barrel and US crude dropped 82 cents to $99.77 at 0622 GMT.
Reuters data showed that early morning trades were about one-quarter of the average trades done in the last two weeks due to public holidays in the United States and the UK. The US driving season traditionally kicks off on the weekend of Memorial Day, a public holiday taking place today.
"The holidays have sidelined trades, as there are no aggressive buyers seen so far, but a weaker economy also seemed to have affected sentiment slightly," said Ken Hasegawa, a commodity derivatives manager at Newedge Brokerage in Tokyo.
A plunge in US home sales reported last week could have stoked investor concerns. Industry data showed pending sales of existing US homes fell more than expected in April to hit a seven-month low, dashing hopes for a recovery in the vital housing market.
However, eyes remained peeled on gasoline demand as there are uncertainties over the strength of the recovery in the world's largest economy.
"There are expectations of prices picking up purely because of the drive time in the US," said Jonathan Barratt of Commodity Broking Services managing director in Sydney. "We feel that might actually support crude prices."
Still, government data ahead of the driving season last week showed gasoline demand over the previous four weeks down 2 per cent on the year.
High energy costs have sparked global concern as they are a drag on economic growth. A slowdown in economic expansion would in turn slow the growth in demand for fuel.
In France, the Group of Eight world leaders agreed that the global economic recovery was becoming more "self-sustained", although they said higher commodity prices were hampering further growth.
Fighting in Libya has almost shut down output in what used to be Africa's third-largest producer, but supply from all 12 members of Opec is expected to average 28.90 million barrels per day (bpd) this month to help cover the gap.
This is up from a revised 28.79 million bpd in April, the Reuters survey of oil companies, Opec officials and analysts found.
Ongoing unrest in small, independent oil producer Yemen has had limited influence on oil prices. Yemeni forces loyal to president Ali Abdullah Saleh opened fire on protesters in the southern city of Taiz yesterday, killing at least six people and wounding 120, hospital sources said.
In the capital Sanaa, seven explosions were heard on last night in the district of Hasaba, the scene of a week-long fighting between Mr Saleh's forces and a rival tribe in which 115 people were killed, residents said.
Reuters
