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UPDATE 6-Brent holds near $107 on Libya fears, US crude falls after EIAs

David Sheppard
Wednesday, 8 Jan 2014 | 11:02 AM ET

* Libyan rebels invite firms to buy oil from seized ports

* EIA reports build at Cushing, smaller crude draw than API

(Rewrites throughout, adds US EIA data, quotes, developments in Libya)

LONDON, Jan 8 (Reuters) - Brent crude held above $107 a barrel on Wednesday, supported by new worries over Libyan supplies and increasing its premium over the U.S. crude oil benchmark to the highest level in a month.

Brent's premium over U.S. crude rose to more than $14 a barrel, as a build in crude stockpiles at the U.S. contract's delivery point in Cushing, Oklahoma, reported by the U.S. Energy Information Administration (EIA) on Wednesday, overshadowed falling inventories elsewhere in the country.

Crude stocks at Cushing rose by 1.1 million barrels last week, the EIA said, while stocks nationally declined by 2.7 million barrels. That was far less, however, than a 7.3 million barrel country-wide decline reported by industry group the American Petroleum Institute on Tuesday.

Gasoline and distillate stocks, including diesel and heating oil, also rose sharply.

"Put all that together and it looks kind of bearish," said Phil Flynn, analyst at Price Futures Group in Chicago.

"We have production exceeding demand, so the expectation is that refiners aren't going to need as much crude going forward."

Brent crude for delivery in February was up 15 cents at $107.50 a barrel at 1556 GMT, after settling up 62 cents on Tuesday. The contract edged above its 200-day moving average at $107.44, a key technical indicator watched by traders.

U.S crude was down 42 cents at $93.25 a barrel, posting its lows for the session of $92.85 shortly after the EIA data.

Brent's premium over U.S. crude widened to $14.25 and earlier in the session touched a month high of $14.40.

LIBYA TENSIONS

Brent was underpinned by tensions in Libya after a heavily armed eastern autonomy group said on Tuesday it would invite foreign companies to buy oil from seized ports and protect arriving tankers, in defiance of the government in Tripoli, which has vowed to stop them.

While Libyan's oil minister said on Wednesday that exports had recovered to around 510,000 barrels per day (bpd), any attempt by protestors to export crude from ports without Tripoli's permission could lead to clashes.

Libyan Prime Minister Ali Zeidan warned on Wednesday its navy would sink oil tankers that approached eastern ports controlled by armed protesters led by tribal leader and 2011 civil war hero Ibrahim Jathran.

"The situation boils down to the central government being unable to access major export facilities without risking a prolonged and violent civil war and the separatists being unable to secure exports without access to naval forces," analysts at JBC Energy in Vienna said in a note.

Libya's oil exports have fallen from more than 1 million bpd in July, when the strikes began, supporting international oil prices.

The government is expected to increase exports, however, following the restart of the 350,000 bpd El Sharara oilfield at the weekend. The first exports of crude from El Sharara since October are expected to load around Jan. 10-12 from the government-controlled port of Zawiya, traders said.

Oil prices in the United States took some support from freezing weather in North America, which boosted demand for heating oil and has led to malfunctions and closures at at least five refineries in the United States and Canada.

(Additional reporting by Anna Louie Sussman in New York and Jacob Gronholt-Pedersen in Singapore; editing by William Hardy)