UPDATE 6-Oil falls below $111 on increase in U.S. crude stocks

Joshua Franklin
Wednesday, 27 Nov 2013 | 11:40 AM ET

* US crude stocks rose by 3 mln barrels last week - EIA

* Highest for this time of year since records began in 1982

* Oil workers strike over insecurity in Libya's Benghazi

(Updates throughout)

LONDON, Nov 27 (Reuters) - Brent oil fell below $111 a barrel on Wednesday as a higher-than-expected build in U.S. crude stocks weighed on prices, but unrest in Libya provided some support.

Brent crude fell 32 cents to $110.56 a barrel by 1624 GMT, after settling 12 cents lower on Tuesday.

U.S. oil was down $1.50 at $92.18 a barrel after falling as low as $92.04.

U.S. Energy Information Administration (EIA) data showed U.S. crude stocks rose by almost 3 million barrels to their highest level for this time of year since records began in 1982.

"The data was bearish for crude, clearly," said Gareth Lewis-Davies, senior energy strategist at BNP Paribas. "The build was far greater than expected."

This came after data from industry group the American Petroleum Institute on Tuesday showed stocks rose by 6.9 million barrels last week. Analysts had expected an increase of 600,000 barrels.

The growing U.S. stockpiles helped push the spread between Brent and benchmark U.S. crude to an eight-month high of $18.77 a barrel, with weakness in U.S. oil eventually dragging Brent lower, Commerzbank senior oil and commodities analyst Carsten Fritsch said.

Supporting the price of Brent crude were disruptions in Libya, where protests at oil ports have reduced oil flows from the OPEC member to 20 percent of previous levels, according to Libyan Prime Minister Ali Zeidan.

"I don't expect the situation in Libya to improve anytime soon," Fritsch said. "Because of the sectarian and decentralised protests, there's no way to find a common solution."

Oil revenues for the OPEC member could fall even further to around 10 to 15 percent of previous levels, Samuel Ciszuk, senior adviser on Energy Supply Security at the Swedish Energy Agency, told the Reuters Global Oil Forum.


Brent was stable by comparison with its wide swings on Monday following a deal between world powers and Iran over its nuclear programme.

"In essence, the initial euphoria that suggested there would be additional oil supply coming from Iran has now abated," said BNP Paribas' Lewis-Davies.

Iran's oil minister, Bijan Zanganeh, told the Financial Times that it did not expect to raise oil exports immediately after Sunday's nuclear deal but was in talks with potential Western investors in its energy industry.

"This is a first step for lifting the sanctions," Zanganeh was quoted as saying. "We can't sign contracts, but the agreement will open doors."

India's top oil bureaucrat said the country could buy more crude from Iran in the next four months and intended to increase purchases further in the next fiscal year.

India, one of Tehran's four main oil buyers, has room to increase its imports after they tumbled around 40 percent this year to below even what was permitted by sanctions.

(Additional reporting by Manash Goswami in Singapore; Editing by Christopher Johnson and Jane Baird)