World oil prices fell again yesterday as Iraq restored oil exports and hedge funds continued the rush to take profits from record highs.
US light crude shed 21 cents to $42.06 a barrel, after a 90-cent drop on Monday, taking losses to more than $7 from recent peaks.
London Brent crude, closed on Monday, was down $1.07 at $39.57 a barrel.
"Funds are being forced out but many of them still have deep long positions," said brokers Refco of the investment funds who helped spur US crude to a record high of $49.40 on August 20.
Exports of southern Iraqi Basra crude ran near full capacity at 1.7 million barrels a day after repairs following sabotage attacks and the first shipment for three months of northern Iraqi Kirkuk crude was loading at Turkey's export terminal Ceyhan.
An Iraqi official said Baghdad aimed to sell up to 300,000 barrels per day of Kirkuk crude via term contract deals. That was read as a sign Iraq is having some success in thwarting attacks that have all but idled exports from its northern pipeline since the US-led war began in March last year.
A number of European refiners are following the lead of Turkey's Tupras, the first company to seal a post-war term contract for Kirkuk oil.
"We hope to sell about 10 million barrels of Kirkuk a month through term contracts," the official said. "We're concentrating on Europe and have already had a number of requests from refiners there."
Despite the price drop, crude is still nearly 30 per cent higher than at the start of the year as producers pump close to full tilt to meet the fastest world demand growth in 24 years.
Opec President Purnomo Yusgiantoro said on Monday the group which controls more than half of world exports aimed to increase spare output capacity by about one million barrels per day (bpd) in the next few months in help bolster stretched supplies.
The Organisation of the Petroleum Exporting Countries is already pumping close to 30 million bpd, its highest level since 1979.
Only Saudi Arabia has any significant spare capacity within the 11-member cartel, which is due to meet on September 15 in Vienna to review output policy.
Weekly US government inventory data due today is forecast in a Reuters poll to show an average increase of 1.2 million barrels in crude stocks in the week to August 20 on heavy imports.
Predictions for inventories of distillates, including winter heating oil, were for an 800,000-barrel stockbuild.