Brent falls as Libya's civil war nears end
NEW YORK (Reuters) - Brent crude fell more than 1 percent on Monday as investors anticipated a resumption of oil exports from the OPEC-member Libya, where rebels moved to control most of Tripoli and an end to the 6-month-old civil war seemed close.
Libyan government tanks and snipers put up scattered resistance in Tripoli after rebels swept into the heart of the capital, cheered on by crowds hailing the end of Muammar Gaddafi's 42 years in power.
"A resolution of the conflict is modestly bearish for crude oil prices, but it is less likely that we will get a $10-$20 drop in price of crude," Jason Schenker, president at Prestige Economics LLC in Austin, Texas, said in a note.
"While the fundamentals of the conflict resolution appear at first glance to be only bearish, it could turn out to be quite bullish, as it could engender further conflict in the region," Schenker said.
Brent losses were limited by the dollar's weakness .DXY and the greenback's slip and a bounce by equities on Wall Street helped lift U.S. crude prices, for both the expiring front-month September and October contracts.
The euro edged up, helped by a rise in European shares, while the dollar weakened on speculation that the Federal Reserve may show some indication this week about the need to take additional measures to support an ailing economy.
ICE Brent October crude fell $1.25 to $107.37 a barrel by 11:09 a.m. (4:09 p.m. BST), having recover from a $105.15 intraday low.
U.S. expiring September crude rose 84 cents to $83.10 a barrel, having reached as high as $84.30. More actively traded October crude rose 79 cents to $83.20 a barrel.
Brent's premium to U.S. crude narrowed to $24.05 a barrel, after reaching a record $26.69 on Friday.
Part of U.S. crude divergence from Brent is because traders are starting to bail out of their Brent/U.S. spread positions, said Dominick Chirichella of the Energy Management Institute.
Speculators raised slightly their long exposure to Brent in the week to August 16, data from the Intercontinental Exchange showed.
Selling by "soft longs" who increased exposure last week and profit taking by traders with long-held positions could put more short-term pressure on Brent, according to brokers.
Libya pumped around 1.6 million barrels per day (bpd), nearly 2 percent of global supply, before the war cut its output. Most of Libya's high-quality crude flowed to European refiners. After Libyan exports ceased, tighter supply drove Brent to a two-year high of $127.02 in April.
Production fell to almost nothing during the conflict but technical staff from Italy's oil and gas major ENI (ENI.MI) have already arrived in Libya to look into restarting oil facilities.
Some Libyan output will be able to restart in a few months, but it will take as long as 18 months to reach the prewar level, Libya's former top oil official Shokri Ghanem said on Monday.
(Additional reporting by Gene Ramos in New York, Claire Milhench in London and Seng Li Peng in Singapore; Editing by Andrea Evans)
- Tweet this
- Share this
- Digg this