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Oil drops as fear fades over insurgency's impact on Iraq's oilfields

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The price of oil fell Tuesday as fears receded that the insurgency roiling Iraq would affect its oil production and exports.

Islamic militants have been steadily expanding their grip on the country's north, where they control a broad swath of territory. But the bulk of the country's production and export operations are in the south, which have so far been spared in this month's advance by the al-Qaeda inspired group. Iraq's daily oil production hit 3.5 million barrels this year, up from nearly 2.4 million a day in 2009.

Benchmark U.S. crude for August delivery dropped 46 cents to $105.71 per barrel on the New York Mercantile Exchange. The contract dropped 66 cents to settle at US$106.17 per barrel on Monday. Brent crude, used to price international oils, fell 30 cents to $114.82 a barrel in London.

"Brent crude oil fell after hitting technical resistance at overbought levels," said Desmond Chua, market analyst at CMC Markets in Singapore. "This should signal a period of consolidation as the majority of the geopolitical premium has been priced in, unless we see new risk of disruptions to oil supplies in Iraq."

In other energy futures trading on the Nymex:

— Wholesale gasoline slipped 0.5 cents to $3.07 a gallon.

— Natural gas rose 0.7 cent to $4.453 per 1,000 cubic feet.

— Heating oil fell 0.3 cent to $3.038 a gallon.

(TSX:ECA, TSX:IMO, TSX:SU, TSX:HSE, NYSE:BP, NYSE:COP, NYSE:XOM, NYSE:CVX, TSX:CNQ, TSX:TLM, TSX:COS.UN, TSX:CVE)

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