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Libya doubts widen, pulling US oil above $100 after sell-off

Pump jacks and wells are seen in an oil field on the Monterey Shale formation where gas and oil extraction using hydraulic fracturing, or fracking, is on the verge of a boom, March 23, 2014 near McKittrick, California.
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Pump jacks and wells are seen in an oil field on the Monterey Shale formation where gas and oil extraction using hydraulic fracturing, or fracking, is on the verge of a boom, March 23, 2014 near McKittrick, California.

Brent crude gained $1 on Thursday, recovering from a five month low as doubts persisted that a lasting deal was imminent to reopen vital Libyan oil ports.

The International benchmark's gains followed a drop of more than $3 this week, which narrowed its gap with the U.S. oil benchmark, a closely watched and heavily traded spread, to less than $5. That's the slimmest since September.

Brent crude extended early gains, rising by more than $1 to abvoe $106 a barrel, cents above its lowest levels since November. U.S. crude, or West Texas Intermediate (WTI), also rallied, adding 67 cents to settle at $100.29 a barrel.

Hopes were lifted this week that an eight-month standoff that dried up oil exports and revenue in Libya would end soon. A government spokesman said on Wednesday an agreement with rebels to reopen some oil ports could be finalized in two to three days. Analysts, however, were cautious.

"The rebels have imposed conditions that are virtually impossible to meet, demanding, for example, a referendum on greater autonomy in the eastern provinces," said a note from Commerzbank. "It is by no means clear that the export terminals will be opened, so we envisage only limited downside potential to at most $103 per barrel (for Brent) ... and expect to see the price recover if the opening of ports were to be delayed."

Libya's crude output has fallen to about 150,000 bpd from 1.4 million bpd in July, when a wave of protests started across the north African country. Its proximity to Europe, just across the Mediterranean, makes it a strategic energy supplier.

Even if a deal is clinched with rebels who have blockaded eastern ports, some major fields and a pipeline in the country's southwest remained closed by separate protests. In the short term, demand for Libyan oil is likely to be limited due to reliability issues, while shipping and insurance costs were expected to rise in light of recent hostilities.

Oil may draw support from data that showed U.S. companies stepped up hiring in March, offering new evidence on Thursday the economy was regaining momentum after a weather-driven lull over the winter.

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Symbol
Price
 
Change
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BRENT
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OIL
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