Brent oil futures fell on Tuesday, giving back some of the previous session's sharp gains on expectations that fresh disruptions over the weekend in exports from Opec member Libya could be short-lived. Brent rose 2.5 percent on Monday as reports of Libya's worst civil unrest since the civil war in 2011 fuelled concerns over global oil supplies.
The oil market seesawed on varying reports out of Libya. "The Libyan deal is highly fluid," said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois. "Yesterday we were looking at production outages, today there's a renewed upswing in output. It just adds to the volatility." Libya's crude oil exports have slumped to around 90,000 barrels per day (bpd), less than 10 percent of capacity, after new shutdowns that began over the weekend.
Libya's prime minister said exports from the eastern port of Hariga with a capacity of 110,000 bpd would resume after one week. The Opec member had brought exports back to around 450,000 bpd over the last month before this latest bout of unrest. Brent futures for December ended the day 60 cents lower at $109.01 a barrel, after trading as low as $108.45 and gaining $2.68 per barrel on Monday.
US light, sweet crude for December fell 48 cents to settle at $98.20 a barrel. European benchmark Brent's premium over US benchmark West Texas Intermediate (WTI) narrowed by around 40 cents, after widening by nearly $2 on Monday, as fears over Libyan supplies eased. It settled at $10.81. "I think that spread is moving out again if that goes on for awhile," said Gene McGillian, an analyst with Tradition Energy in Stamford, Connecticut. "Brent will catch more of a bid and WTI will be held back by the really strong production levels we see in North America."
A joint statement by the UN nuclear agency and Iran after talks on the Islamic state's nuclear program also helped limit gains in oil prices. Oil markets have been balancing supply risks against rising inventories in the United States due to seasonal refining maintenance which has cut crude demand. Refiners in the Gulf Coast refining hub were expected to return from autumn work by mid-November.
Stockpiles at the Cushing, Oklahoma, delivery point for the US oil futures contract have built over the last two weeks but are expected to decline as refiners come out of maintenance and draw on crude supplies. Declining Cushing supplies had helped support US oil futures and tighten the discount to Brent crude as infrastructure has come online to deliver oil to key refining hubs.
News that BP's 405,000 bpd Whiting refinery in Indiana will not reach full production until the first quarter of 2014 may help support Brent's premium over US crude in the near-term. The BP1 pipeline runs from Cushing to the refinery and is expected to off take heavy Canadian crude. Total US crude oil stockpiles have risen 24 million barrels since mid-September, according to government data.
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