Oil futures settle lower on Libyan port deal

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Tuesday, 08 April 2014 11:46

Oil futures settled lower Monday, fluctuating as investors await implementation of a weekend agreement that would reopen Libya's Zueitina and Marsa al-Hariga oil ports.

The eastern Libyan ports have a combined export capacity of 180,000 b/d. 

ICE May Brent settled 90 cents lower at $105.82/b. Earlier, the contract dipped to an intraday low of $105.13/b. On NYMEX, May crude hovered near the $100/b mark, finally settling at $100.44/b.

The Brent-WTI spread fell to a low of $4.82/b during the session then settled at $5.38/b, down 20 cents from Friday.

In products, NYMEX May ULSD settled 1.72 cents lower at $2.8907/gal and May RBOB ended 53 points lower at $2.9260/gal.

"As the negotiations were reported a week ago, the news doesn't necessarily constitute a bearish shock, but it does certainly increase the likelihood that further progress will be made," said Tim Evans, commodity analyst at Citi Futures Perspective, in a note.

Gene McGillian, an analyst at Tradition Energy, said there was initial selling in crude on the idea that exports will start up, "but we have heard this repeated many times in the past and then they back down. Overall the market is soft and predicated on a large amount of US crude production."

Evans noted that "although Kuwaiti oil minister Ali al-Omair is probably correct in his cautious remarks over whether other producers need to be worried about potential oversupply, we continue to see potential for Libyan output to rise by as much as 1.0 million b/d from recent levels, with the increase all contributing to a global supply/demand surplus, all else remaining equal."

Last week, a senior official with state-owned National Oil Corp. said Libyan oil production had recovered slightly to more than 165,000 b/d as of April 3.

McGillian said NYMEX crude pivoted within $100/b as it searched for a driver.

"We are facing a build in crude stocks when data comes out this week after the previous week's draw looked like a one-off because of issues with the Houston Ship Channel," McGillian said.

Analysts polled by Platts said US commercial crude stocks are expected to have risen 2.5 million barrels last week.

Source: Platts
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