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UPDATE 4-Brent above $109 on Libya, WTI falls on U.S. stock build

David Sheppard
Wednesday, 30 Oct 2013 | 7:34 AM ET

* Libya exports in focus as down to 10 pct of capacity

* Higher-than-expected oil build weighs on U.S. crude

* Investors await outcome of Fed policy meeting

* Coming up: Weekly US fuel stocks data from EIA at 1430 GMT

LONDON, Oct 30 (Reuters) - Brent edged higher above $109 a barrel on Wednesday as export disruptions in Libya cut supplies to Europe and Asia, while the benchmark U.S. contract fell towards $97 after a bigger-than-expected increase in inventories in the United States.

The divergent course of North American and international oil markets boosted Brent's premium over the U.S. benchmark to more than $12 a barrel, with the heavily traded spread on course to settle at its widest level since April.

Traders were also looking ahead to comments from a U.S. Federal Reserve policy meeting that ends later in the day, but any impact on oil prices may be limited. The U.S. central bank is widely expected to maintain its massive economic stimulus programme.

Brent crude for December delivery was up 38 cents at $109.39 a barrel by 1117 GMT, after falling 60 cents on Tuesday. It touched an intraday high of $109.64 on Wednesday.

U.S. crude, also known as West Texas Intermediate (WTI), was 92 cents lower at $97.28, having hit an intraday low of $97.19.

The Brent-WTI spread expanded to $12.09 a barrel and briefly touched $12.14, its widest in a week. Brent-WTI has not settled above $12 a barrel since early April.

Brent was underpinned by a sharp drop in Libya's crude oil exports, which boosted the international benchmark by almost $3 a barrel on Monday. Libya's exports have slumped to around 90,000 barrels per day, less than 10 percent of capacity, as protests have halted operations at ports and fields.

"There is no indication that Libya's oil supply will normalise anytime soon," Commerzbank analyst Carsten Fritsch said.

"The oil market is thus split in two at the moment: tight supply in Europe versus ample supply in the United States. Against this backdrop the price differential between Brent and WTI should remain high for the time being."

Italian energy major Eni, the biggest foreign producer in Africa, cut its production outlook for 2014 on Wednesday due to supply cuts in Libya and Nigeria. It previously guided investors to expect output in line with last year's.

US OIL STOCKS

Weighing on U.S. oil futures, crude inventories in the United States rose by 5.9 million barrels in the week to Oct. 25, statistics from the American Petroleum Institute (API) showed on Tuesday, exceeding analysts' expectations of a 2.2 million gain.

Crude stocks at the closely watched Cushing, Oklahoma storage hub, the delivery point of the U.S. crude oil future contract, rose by 2.2 million barrels, the API said.

The U.S. Energy Information Administration will release its own weekly oil inventory data at 1430 GMT on Wednesday.

FED IN FOCUS

A mixed bag of U.S. economic data over the last few days has reinforced expectations the Fed will not reduce its $85 billion of monthly asset purchases until March at the earliest.

"If (the Fed) acts as expected and there is no change in their position, it will likely support oil prices, but not cause them to be pushed up significantly," Tetsu Emori, a commodities fund manager at Astmax Investments, said.

The policy statement from the Federal Open Market Committee (FOMC) meeting is expected at 1800 GMT.

Investors will also keep an eye on a series of technical and diplomatic meetings on Iran's nuclear programme, which could pave the way for an easing of sanctions on Iranian oil exports.

Any increase in Iranian oil exports may take some time, however, while the U.S. Senate is debating fresh sanctions aimed at further curbs of Iran's oil sales, an influential senator said.